Online Customer Loyalty

“…To encourage repeat purchases and build customer loyalty, companies must shift the focus of e-business from e-commerce — the transactions — to e-service — all cues and encounters that occur before and after transactions.”

(Zeithaml 2000, p. 8)

From 1992 to 1999, the contribution of the service industry in the German Gross Domestic Product (GDP) increased from 60 percent to approximately 64 percent. In the same period, the German service industry grew, in absolute numbers, from a 2.9 billion to a 3.6 billion industry. This represents a thirty percent growth, while the German GDP grew twenty-three percent. Currently, 63.8 percent of the German GDP is attributed to the service industry (Statistisches Jahrbuch 2000, p. 641). Moreover, in 1999, 66 percent of the German work-force was employed in service jobs (Statistisches Jahrbuch 2000, p. 111). While the German work-force decreased by 4.8 percent from 1991 to 1999, the service work-force increased by 7.9 percent in the same period. This resulted in an absolute increase of 7.5 percent in participation of the service industry in the German work-force, in less than ten years. Consistent with the statistics presented above, has been the growth and increased importance the service industry played in research. E.g., Iacobucci (1998) found more than 1,000 references in a search, at the ABI-Inform electronic database, for the words “services marketing”, referring to publications for the time period between 1986 and 1997.

Technology-facilitated transactions are dramatically changing the way in which customers interact with firms to create service outcomes (Dabholkar, Shepherd & Thorpe 2000; Meuter et al. 2000). In Chapter 1, SSTs were defined as interfaces that allow companies to interact with customers and customers to produce services without having to have contact with companies’ employees. Companies, regardless of industry, are employing technology at different stages in the service delivery process and in service support, in an attempt to improve the value of their offerings, the quality and productivity of their operations and, ultimately, to save money.

Conceptualizations of brand loyalty go back to the late sixties, when George Day (1969) argued that brand loyalty should be evaluated with both attitudinal and behavioral criteria. Years later, Jacoby & Chestnut (1978) carved a multidimensional brand loyalty definition, also including attitudinal and behavioral components. These authors have explored in their definition “… the psychological meaning of brand loyalty in an effort to distinguish it from behavioral definitions” (Oliver 1999, p. 35). The behavioral component of brand loyalty is captured by customers’ actual purchase behavior, whereas the attitudinal component of brand loyalty is captured by evidence of customers’ relative brand preference and/or attachment to brand attributes (Day 1969). Even though brand loyalty has been defined long ago, it has been measured in early marketing studies as repeat purchase or repeat purchase intentions (Ganesan 1994). Moreover, current discussions about how to measure brand loyalty, its antecedents and behavioral consequences, show that the conceptualization of brand loyalty is not a fully exhausted topic. In a recent Marketing News article, Neal (2000) reopens the debate about issues related to the operationalization of the loyalty construct by stating that “Loyalty is behavior”. Even considering that researchers do not agree with Neal’s (2000) behavioral only loyalty definition, there is still considerable disagreement on how to operationalize the attitudinal component of brand loyalty (Grisaffe 2001).

Ongoing relationships between marketers and their customers is receiving renewed attention (Berry 1995; Gwinner, Gremler & Bitner 1998; Sheth & Parvatiyar 1995). Previous customer relationship management research has focused on the benefits of strong customer relationships as viewed from the perspective of the firm (Aaker 1991; Peterson 1995; Reichheld 1993). Although positive outcomes for the firm are well documented, for a relationship to exist and last, both the firm and the customer must benefit. Yet, the benefits to the customer for maintaining a long-term relationship with suppliers have received considerably less attention in the marketing literature (Barnes 1994; Berry 1995; Bitner 1995; Peterson 1995; Sheth & Parvatiyar 1995). The objective of this chapter is to draw on established theories and conceptual work that explain which are the customers’ motivations in engaging in and maintaining long-term relationships with suppliers. The main research question to be answered by the discussion provided in this chapter is: What is the customer motivation to maintain relationships?

This sub-chapter provides a detailed description of the methodology used in this study, as well as about its empirical design and the procedures adopted for data collection and organization. Initially, the different methodologies available to analyse customers’ repatronage decisions are described and the methodology choices made are discussed. This will encompass a review of academic literature in which the methodology choice of other researchers is examined. Next, the empirical research design is detailed. It is worth pointing out that the empirical design is one of the strengths of this thesis and has been called for by a number of researchers, such as Anderson & Mittal (2000); Grisaffe (2001); Reinartz & Kumar (2000b). Finally, the procedures utilized for data collection are explained.

Technologyis changing the way customers and companies interact. Academic marketing research has begun to explore the topic of ’self-service purchase’ — as when customers shop through a technological interface rather than in a ’brick-and-mortar’ shop. How consumer behavior is affected by and adapted to SSTs that enable them to purchase independent of direct service employee involvement is of great interest to both practitioners and marketing scholars. This thesis focuses on the behavioral consequences of self-service purchases when consumers shop via the Internet, and specifically on the effects that customers’ assessments of self-service encounter experiences (attitudes) and transactional history (prior behavior) have on their repat ronage behavior. The concept of repatronage in the context of retailing refers to the customer’s decision of whether to remain in the relationship. Two aspects of the repatronage behavior are investigated in this study: the decision of whether or not to repurchase (Repurchase Decision) and the decision of how much to spend in a subsequent period (Usage Decision). This thesis stands in contrast to previous research by examining actual repatronage behavior, as opposed to customers’ repatronage intentions, and by combining transactional variables with a number of attitudinal predictors.