Social Media and Customer Loyalty in the Travel Trade:

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1 KATHOLIEKE UNIVERSITEIT LEUVEN UNIVERSITEIT GENT UNIVERSITEIT HASSELT VRIJE UNIVERSITEIT BRUSSEL KATHOLIEKE HOGESCHOOL MECHELEN KATHOLIEKE HOGESCHOOL BRUGGE-OOSTENDE ERASMUSHOGESCHOOL BRUSSEL HOGESCHOOL WEST- VLAANDEREN XIOS HOGESCHOOL LIMBURG PLANTIJN HOGESCHOOL ANTWERPEN Academic Year Social Media and Customer Loyalty in the Travel Trade: A Relational Benefits Perspective Sociale Media en Loyaliteit in de Reissector: een Relational Benefits Perspectief Master s thesis submitted to obtain the degree of Promotor Prof. Dr. Robert Govers Master of Science in Tourism by: Astrid Senders 1

2 Abstract The aim of this study is to create an understanding of how social media affect customer loyalty to tour operators, by investigating the complex online relationships they have with their clients. The relational benefits approach was used to investigate several relational benefits and their influence on customer loyalty from an online customer perspective. The sampling frame includes customers having a relationship with tour operators on Facebook. Structural Equation Modeling was used to analyze the data, a method which is able to test complex theoretical models. Findings show that customer loyalty is only directly affected by social and functional benefits. Indirect effects have been found of confidence and hedonic benefits. Special treatment benefits showed no significant effects at all. The theoretical contribution of this study is the application of CRM research in relation to the tourism industry, in a rather new context of social media. The practical contribution is that the travel trade gains insight in online factors that drive their customers to become loyal. Key words: customer loyalty, social media, relational benefits approach 2

3 In het kort: Het doel van dit onderzoek is het leren begrijpen van hoe sociale media klantenbinding beïnvloed bij reisorganisaties, door de complexe online relaties te onderzoeken tussen reisorganisaties en hun klanten. Hiervoor werd gebruik gemaakt van de relational benefits benadering om verschillende relationele voordelen te onderzoeken en het effect ervan op klantenbinding vanuit een online klantenperspectief. Het steekproefkader bestond uit klanten met een relatie met reisorganisaties op Facebook. Om de verkregen data te analyseren, is de methode Structural Equation Modeling gebruikt, een methode welke in staat is complexe modellen te testen. Resultaten tonen aan dat klantenbinding alleen direct beïnvloed wordt door social en functional benefits. Indirecte effecten zijn gevonden voor confidence en hedonic benefits. Special treatment benefits bleken helemaal geen effect te hebben. Dit onderzoek draagt bij aan de huidige literatuur, omdat CRM onderzoek nog maar weinig is toegepast op het gebied van toerisme en ten tweede ook in een vrij nieuwe context van sociale media. Het onderzoek is daarnaast ook van praktisch belang voor de professionele sector, doordat het marketeers inzicht geeft in online factoren die een rol spelen bij klantenbinding. 3

4 Table of contents List of figures... 6 List of tables... 7 List of appendices Introduction Research objective and question Demarcation Definitions Structure of the thesis Conceptual and Theoretical Foundation The concept of Customer Loyalty The concept of Customer Satisfaction The Relational Benefits Approach Social Benefits Confidence Benefits Functional Benefits Special Treatment Benefits Hedonic Benefits Application of the Relational Benefits Approach in the context of Social Media Relationship Commitment Word of Mouth The Construction of the Proposed Model Consequences of Relational Benefits The influence of Customer Satisfaction and Relationship Commitment on Customer Loyalty The influence of Relationship Commitment and Customer Satisfaction on Word of Mouth A graphical illustration of the proposed conceptual model

5 4. Methodology Research design Data collection Measurement Data analysis Results Checking assumptions Exploratory factor analysis Confirmatory factor analysis Structural Equation Modeling Nested Structural Models Hypotheses testing Conclusion Limitations and Suggestions for Further Research Theoretical and Managerial Implications Acknowledgements References Appendices

6 List of figures Figure 1: Evolution in active Facebook users ( )...11 Figure 2: Relative attitude behavior relationship...16 Figure 3: The proposed conceptual model...30 Figure 4: Final model

7 List of tables Table 1: General sample details...35 Table 2: Fit indices and their acceptable threshold levels...41 Table 3: Interpretation of BCC values...45 Table 4: Interpretation of BIC values...45 Table 5: Significant direct effects found by the final model...48 Table 6: Overview of consulted studies for the operationalization of constructs...67 Table 7: Studies consulted with respect to "Social Benefits"...69 Table 8: Consulted studies with respect to "Confidence Benefits"...70 Table 9: Consulted studies with respect to "Functional Benefits"...71 Table 10: Consulted studies with respect to "Special Treatment Benefits"...72 Table 11: Consulted studies with respect to "Hedonic Benefits"...73 Table 12: Consulted studies with respect to "Customer Satisfaction"...74 Table 13: Consulted studies with respect to "Customer Loyalty"...75 Table 14: Consulted studies with respect to "Relationship Commitment"...76 Table 15: Consulted studies with respect to "Word of Mouth"...76 Table 16: Measurement Items included in questionnaire (Likert scales 1-7)...77 Table 17: Regression weights in the measurement model Table 18: Significant paths found with the proposed model Table 19: Significant indirect effects found by the final model

8 List of appendices Appendix 1: Measurement scales reviewed for operationalization of constructs.67 Appendix 2: Output used to check assumptions 81 Appendix 3: Output used during exploratory factor analysis..100 Appendix 4: Output used during confirmatory factor analysis Appendix 5: Output used during structural equation modeling..128 Appendix 6: Output used during nested structural models testing

9 1. Introduction The Internet has changed our daily lives completely. From a supplier s point of view, the Internet enables companies to attract new customers. For customers, the Internet created a greater choice in products and services, value and pricing flexibility, due to access to new and more products. This increased competition and therefore companies are challenged to remain attractive to customers and to make them loyal to their brand (O Reilly & Paper, 2009). Keeping existing customers by fostering customer loyalty is less expensive than to acquire new customers; it takes high investments to obtain information about new customers and to earn their trust (Conze et al., 2010; Hennig-Thurau, 2002; Gwinner et al. 1998; O Reilly & Paper, 2009). Long-term relationships with customers are essential for companies operating in highly competitive environments. As service goods, tourism products are nontransparent and therefore a chance exists that customers change suppliers. The nontransparent aspect is due to the distance between the place of purchase and the place of consumption (Conze et al., 2010). However, Yen & Gwinner (2003) pointed out that in the literature the focus on the benefits of long-term relationships for companies is replaced by the focus on the benefits for customers: Today it is crucial to know the desires of the customer and to understand what services generate benefits for the customers (Conze et al., 2010). To remain competitive, companies work on their relationships with their customers which is also well known as relationship marketing. Berry (1983) defined relationship marketing as attracting, maintaining and enhancing customer relationships. Sheth (1996, cited in Hennig- Thurau, 2002, p.231) states that customer loyalty is a primary goal of relationship marketing and sometimes seen as equal to the concept of relationship marketing. According to Vogt 9

10 (2011), travel and tourism organizations have been one of the early adopters of Customer Relationship Management. Conze et al. (2010) confirm this by stating that the travel industry was a pioneer to introduce loyalty programs like frequency flyer programs or hotel loyalty cards. Before, marketing practices were one way, but this has changed over the years with the advent of social media. Social media is different from traditional media, since the communication runs both ways instead of one-way. The two-way aspect makes it possible to start conversations between multiple parties (Miller, 2011). Hanna et al. (2011) concluded that social media must be used in addition to traditional media in their marketing activities. But the emergence of Web 2.0 requires a different approach of marketers who try to connect with their customers (Meadows-Klue, 2008). Meadows-Klue (2008) argues: Relationship marketing for the Facebook generation demands both thinking and acting differently. Social media have gained popularity the last few years. Developments in information technology have led to new possibilities for communication in the travel industry. Social networking sites are increasingly used by online travelers who like to communicate with others regarding travel information and by those who search for travel-related information (Sung-Bum & Dae-Young, 2010). Therefore social media are becoming more and more important in the online tourism domain (Xiang & Gretzel, 2011). Social media are used by people sharing their experiences and opinions with others and consist of social networks (e.g. Facebook, MySpace, Linkedin), blogs, micro blogs (e.g. Twitter), social bookmarking and news services (e.g. NUjij), media sharing sites (e.g. YouTube) and virtual communities (e.g. Second Life) (Miller, 2011). Social networking sites are, presumably, the most popular 10

11 social media. Social networking site Friendster was the pioneer in social media as known nowadays. In 2003, it introduced the concept of making friends online. Friendster was popular at that time, but soon MySpace came along which became the most popular SNS in Other SNS were launched in 2003 and 2004, respectively Linkedin for business purposes and Facebook, initially, for college students. Today, SNS are being used by all kinds of people. Since Facebook allowed users of all ages, it became one of the most popular SNS as well as for people as for marketing management. As figure 1 shows, Facebook has over 800 million users that make active use of the social medium. According to Zarella & Zarella (2011), half of them logs in each day. Beside a huge amount of users, Facebook has the most general audience which makes it interesting for all kinds of businesses. All the information resulting from 800 million profiles make Facebook a great source for marketers. Therefore, social media marketing is being more and more applied (Miller, 2011). Figure 1: Evolution in active Facebook users ( ) Source: Facebook (2011) 11

12 In professional journals regarding tourism like the Belgian Travel Magazine, it can be read that, also in the travel trade, social media are more and more included in the marketing mix (2011a). Social media are becoming more and more important and experts in the professional sector are recommending the travel trade to actively anticipate to it (Travel Magazine, 2011b; Travel Magazine, 2011c). The added value of the use of social media by players in the travel trade is questioned. What is the impact of the use of social media by the travel trade? Several benefits of social media for the travel trade are suggested, like enthusing customers for certain destinations, creating brand awareness and creating customer loyalty (Travel Magazine, 2011a). Kasavana et al. (2010) support this, saying that social networking can assist in improving customer loyalty and satisfaction. To achieve goals like these, the use of social media need to respond to customer s needs (Hekkert, 2011). This idea connects to the shift in the literature to focus more on the customer s point of view. The discussion in the professional sector about the impact of social media on customer loyalty may solicit for a more rigorous approach and academic research into the phenomenon. 1.1 Research objective and question Based on the previous discussion, the objective of this research is to create an understanding of how social media affect customer loyalty to tour operators, by investigating the complex online relationships they have with their clients. To meet this objective, this study aims to identify important drivers of customer loyalty in an online context. The focus lies on customers and their relationships with tour operators through social media. From a customer perspective, several relational benefits and their influence on customer loyalty are investigated. Based on the research objective, the research question is as follows: 12

13 In what way and to what extent do relational benefits of social media have an impact on customer loyalty toward a specific tour operator? 1.2 Demarcation As will be explained in further detail in chapter 4, customers of tour operators on Facebook were approached to participate in an online survey in order to be able to answer the research question. Despite of the fact that travel agents are also recommended to use social media, only tour operators were included in this research because it is expected that online bookers are more and more purchasing their holidays directly with tour operators. Furthermore, Facebook was chosen as the sampling frame because its potential for marketing purposes is being recognized more and more, plus it is relatively easy to gain access to tour operators customers on Facebook. The sampling frame was categorized by several different tour operators having a Facebook page, Belgian as well as Dutch ones, attempting to guarantee representative results for the tour operator industry. 1.3 Definitions The most important concepts mentioned in the research objective and research question are briefly explained below. A more detailed explanation will follow in the next chapter. As stated earlier, customer loyalty is the primary goal of customer relationship management. Customer loyalty can be defined as an enduring desire to maintain a valued relationship (Hennig-Thurau et al., 2002). According to the relational benefits approach used in this study, some sort of relational benefits for the customers must be created in order to make customers value the relationship with a company, more specifically a tour operator, in the long run. Relational benefits can be described as those benefits customers receive from long-term relationships above and beyond the core service performance (Gwinner et al., 13

14 1998). Five types of relational benefits are incorporated in this research, namely social, confidence, functional, special treatment and hedonic benefits. 1.4 Structure of the thesis This thesis is further structured as follows. First, the theoretical foundation of the proposed conceptual model is presented. Customer loyalty will be explained in more detail and more attention is given to the relational benefits approach and the relational benefits included here. Second, the construction of the proposed model will be outlined, which is based on existing literature. Third, the methodology of this research will be described and fourth, the results are given. Next, the research question will be answered in the conclusion. Sixth, the limitations of this research are given including suggestions for future research. Finally, theoretical and managerial implications are explained. 14

15 2. Conceptual and Theoretical Foundation This chapter presents the theoretical framework for the foundation of the proposed model regarding social media. 2.1 The concept of Customer Loyalty Relationship building with customers increases customer satisfaction and loyalty (Reynolds & Beatty, 1999; Berry & Parasuraman, 1991; Czepiel, 1990). According to Hennig-Thurau et al. (2002), customer loyalty is an important relationship marketing outcome. Keller (1993, cited in Anderson & Srinivasan, 2003, p.125) defines loyalty as a favorable attitude for a brand manifested in repeat buying behavior. This study incorporates loyalty toward a specific tour operator as well as loyalty toward their online presence. Therefore, loyalty must be distinguished from e-loyalty, defining e-loyalty as a favorable attitude toward a given firm operating online resulting in repeated use of the online relationship (Anderson & Srinivan, 2003). Loyalty relationships between tourists and a service provider are often described by trust, commitment and satisfaction and can be influenced on- and offline, hence both concepts are relevant for this study. As a concept, loyalty captures behavioral, cognitive and affective aspects and can be characterized by attitude (Vogt, 2011). Two key dimensions of loyalty exist in the literature. On the one hand there is behavioral loyalty and on the other hand there is attitudinal loyalty (Anderson & Srinivasan, 2003; Hallowell, 1996; Pritchard et al., 1999). Behavioral loyalty can be characterized by repeat purchases from one particular supplier, an increase in scale and/or scope of the relationship and by recommendations given. Attitudinal loyalty is about feelings customers have creating a sort of attachment to a particular product, service or organization and this is solely cognitive (Hallowell, 1996). Attitude is often related to behavior, but it must be noted that 15

16 these concepts may differ from each other. One may have a favorable attitude toward a specific product or service, but not purchase it repeatedly because of other comparable products or services or a stronger attitude to those other products or services. Furthermore, consumers attitude toward a brand needs to be compared to their attitude toward other brands of the same consumption context. That is to be able to see differences in the strength of attitudes toward these brands and to measure customer loyalty (Dick & Basu, 1994). Figure 2 shows a two-dimensional understanding of customer loyalty, wherein attitudinal and behavioral loyalty are both incorporated. No loyalty forms a combination of low relative attitude toward a brand and low repeat patronage. On the opposite there is true loyalty; a combination of high relative attitude toward a brand and high repeat patronage. Between these two dimensions, two other dimensions exist, namely latent loyalty and spurious loyalty. Latent loyalty means that a person may feel attached to a certain brand, but does not show a repeat patronage. Spurious loyalty however, is the complete opposite of the previous dimension. It represents a person who makes use of a product or service regularly, but no feeling of attachment to the product or service exists (Dick & Basu, 1994). Figure 2: Relative attitude behavior relationship Source: Dick & Basu (1994, p.101) 16

17 Customer loyalty forms an important basis for the development of sustainable competitive advantage (Dick & Basu, 1994), because loyal customers have several benefits in comparison with ordinary customers. First of all, they can cause an increase in revenues for a firm. Second, often they purchase more additional goods and services (Gwinner et al., 1998). Prokesch (1995) argues that British Airways had found that their effort in relationship building had led to an increase of 9% in business generated by their customers. Third, loyalty reduces customer turnover and loyal customers create positive word of mouth (Gwinner et al., 1998; Heskett et al., 1994). Moreover, retaining a customer is less expensive than to attract a new one, due to less sales and marketing costs (Conze et al., 2010; Hennig-Thurau, 2002; Gwinner et al. 1998; O Reilly & Paper, 2009). Health (1997) argues that loyal customers may yield up to ten times more than average customers. 2.2 The concept of Customer Satisfaction Customer satisfaction is incorporated in the conceptual model, because in many studies it proved to be an important determinant of customer loyalty as will become clear later on. Just as customer loyalty, customer satisfaction takes two forms in the field of this study. First, customer satisfaction toward a specific tour operator can be defined as the contentment of the customer with respect to his or her prior experience with a given firm (Anderson & Srinivan, 2003). Second, customer e-satisfaction can be described as the contentment of the customer with respect to his or her prior experience with a given firm operating in an online environment (Anderson & Srinivan, 2003). According to Heskett et al. (1994), customers are satisfied when the service delivered meets their needs. It would be even better, if the service delivery exceeds customers expectations. Therefore, it can also be described as the difference between customer expectations and the delivered service 17

18 (Faché, 2000). In other words, customer satisfaction is the result of customers perception of the value they receive in a relationship (Hallowell. 1996). 2.3 The Relational Benefits Approach In this study the relational benefits approach was used, which indicates the importance of benefits for both customers and companies to continue their relationship in the long run. Positive outcomes of customer loyalty are already mentioned above, however, to create a long-term relationship also the customer must possess relational benefits. In other words, there has been a shift in the literature from a business point of view to the customer s point of view. Many different types of relational benefits have already been investigated (Gwinner et al., 1998; Hennig-Thurau et al., 2002). For this research, the most appropriate variables are chosen; those relational benefits through social media of which it seems plausible to have a significant effect on customer loyalty. Customers who are in a relationship with an organization would like to receive a satisfactory core service. By developing a long-term relationship with a service business, customers will have extra benefits next to the core service. According to Gwinner et al. (1998), these type of benefits are called relational benefits. Hennig-Thurau et al. (2002) define relational benefits as benefits customers likely receive as a result of having cultivated a long-term relationship with a service provider. Literature shows that there are several types of relational benefits. Researchers do not always use the same benefits in their research and in some cases relational benefits are adapted or combined. Gwinner et al. (1998) have found significant relationships between relational benefits and customer loyalty, customer satisfaction and word of mouth. 18

19 Below, different types of relational benefits that seem important for this research are explained Social Benefits The first type of benefits often used in research are social benefits customers receive from a service. Gwinner et al. (1998) define social benefits as a customers need for social bonding and dealing with someone familiar. This type of benefit covers the emotional side of relationships and is about personal recognition of customers by employees and friendships between them (Yen & Gwinner, 2003). It includes the joy that comes with a close relationship with a salesperson (Reynolds & Beatty, 1999). Many customers receive social benefits of having a relationship with a particular service provider, although it seems more common in situations where there is much personal interaction. However, social media are new online environments that might allow personal interaction. Social benefits seem important to incorporate in the conceptual model, since the need for social bonding comes very close with the concept of social media where people come together to interact with each other Confidence Benefits Another type of relational benefits often employed in research are confidence benefits. Confidence benefits are defined by Gwinner et al. (1998) as the customers desire for reduced risks, reliability, and integrity of the company they are engaging with in a relationship. It includes trust and confidence in an organization and the feeling of comfort and security about a company (Gwinner et al., 1998). According to Yen & Gwinner (2003), confidence benefits are the most important type of relational benefits in face-to-face encounters regardless the type of service. Furthermore, confidence benefits seems to be an important variable in the e-business environment according to Su et al. (2009). Su et al. 19

20 argue that customers are concerned about trusting online businesses. Furthermore, customers perceive personal communication as a more reliable source than impersonal communication (Hennig-Thurau et al., 2002), which may lead to distrust in the information given through social media by tour operators. Therefore, confidence benefits seem important to incorporate in the model Functional Benefits Thirdly, functional benefits are designated as relational benefits. This type of benefits covers several aspects in the literature. According to Reynolds & Beatty (1999), functional benefits encompass confidence and special treatment benefits. These type of benefits are already included separately in the theoretical model of this research. However, also items referring to knowledge are often included in functional benefits. Parra-López et al. (2011), Paul et al. (2009) and Wang & Fesenmaier (2004) indicate the existence of the knowledge aspect of this type of benefits. As Wang & Fesenmaier point out, members of communities are looking for functional benefits when they search online to fulfill specific needs. These specific needs may be related to information gathering which helps in decision-making processes. Since the knowledge aspect is not included in any of the other types of benefits, the functional benefits in this study will cover this knowledge aspect. Though, it will not cover confidence and special treatment benefits in this research as the latter variables are treated separately. Moreover, confidence and special treatment benefits are variables originally applied by Gwinner et al. (1998) and later used by many other researchers as well, for example by Kim (2009), Lee et al. (2008), Ruiz-Molina et al. (2008) and Chang & Chen (2007) Special Treatment Benefits Fourth, special treatment benefits will be included in the theoretical model of this research. This type of benefits is about special deals and treatment which is unavailable to non- 20

21 relational customers (Yen & Gwinner, 2003). These benefits include price breaks, faster service and individualized additional services (Hennig-Thurau et al., 2002; Kim, 2009; Lee et al., 2008). Special treatment benefits can be utilized by firms to reward loyal customers and to extend the core service (Lee et al., 2008). There are already many examples of this being applied in online environments including social media, which is the reason to incorporate this variable in the conceptual model Hedonic Benefits A type of benefits which is little used in the literature, are hedonic benefits. Wang & Fesenmaier (2004) argue that one must also take into account experiential aspects when it comes to consumer information searching, because people also pursue enjoyment and entertainment. According to the hedonic perspective, consumers are searching for pleasure in their activities. The online network environment of travel communities is able to bring amusement, fun, enjoyment and entertainment to people (Wang & Fesenmaier, 2004). Hedonic benefits are the final relational benefits variable included in the conceptual model of this study, because it is expected that social media are often used for fun Application of the Relational Benefits Approach in the context of Social Media According to Yen & Gwinner (2003), the relational benefits approach is mainly applied in the context of relationships between customers and employees in face-to-face encounters. Czepiel (1990) defines a customer-salesperson relationship as an ongoing series of interactions between a salesperson and a customer while the parties know each other. Over the years, the relational benefits perspective is also increasingly used in the context of the online environment. Due to the use of the Internet, personal contact with employees is reducing more and more. Therefore, it is interesting to apply the relational benefits approach 21

22 in an online environment. Yen & Gwinner (2003) were one of the first investigating if relational benefits in the online environment lead to any significant outcomes like satisfaction and loyalty. Their findings suggested that this approach remained valid in an online context. The relational benefits approach may already have been applied in an online context, yet little research has been done on the existence of relational benefits within the world of social media. Let alone the existence of relational benefits within the world of social media regarding interactions between customers and service providers, for example tour operators, being active on social media. This is of particular interest because social media re-introduce personal encounters in online environments. 2.4 Relationship Commitment In the literature, relationship commitment is often added as a mediator between relational benefits and customer loyalty. According to Hennig-Thurau et al. (2002), relationship commitment can be defined as a customer s long-term orientation toward a business relationship that is grounded on both emotional bonds and the customer s conviction that remaining in the relationship will yield higher net benefits than terminating it. Another definition often referred to, is the one of Morgan & Hunt (1994): an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it; that is, the committed party believes the relationship is worth working on to ensure that it endures indefinitely. Morgan & Hunt believe that relationship commitment comes close to customer loyalty and, in addition, is central in relationship marketing. Berry & Parasuraman (1991, p.139) agree at the latter point, arguing that relationships are built on the foundation of mutual commitment. 22

23 2.5 Word of Mouth Relationship building increases customer satisfaction and loyalty, but also causes an increase in the amount of positive word of mouth (Berry & Parasuraman, 1991; Hennig- Thurau, 2002; Reynolds & Beatty, 1999). According to Litvin et al. (2007), word of mouth proved to be one of the most important sources of information in a purchase decision making process. Particularly in the hospitality and tourism industry, sectors characterized by intangible products, it is not possible to evaluate products before consumption. People use the Internet to gather information and are being influenced by travel reviews of others sharing their experiences on social networking sites (Litvin et al., 2007). As stated earlier, this is largely due to the customer s perception of personal communication being a more reliable source than impersonal communication (Hennig-Thurau et al., 2002). Word of mouth seems to be a phenomenon which is highly associated with social media and therefore incorporated in the theoretical model of this study. Whether people share their experiences on- or offline, word of mouth captures all informal communications directed at consumers about the usage or characteristics of particular goods and services, or their sellers (Westbrook, 1987). It concerns evaluations that can be either positive, neutral or negative (Anderson, 1998). Heskett et al. (1994) indicate the importance of customer satisfaction and loyalty in terms of their future behavior toward a company. The more satisfied customers are, the more likely it is these customers will be retained. Moreover, consumers who are intended to repurchase are more likely to create positive word of mouth (Anderson, 1998; Heskett et al., 1994; Petrick, 2004b, cited in Petrick & Li, 2006). These customers are called apostles. On the other hand, there are the terrorists; customers who are very unsatisfied and have a devastating impact on the firm by creating negative word of mouth (Heskett et al., 1994). 23

24 3. The Construction of the Proposed Model This section proposes the construction of the proposed model, measuring the influence of social media on customer loyalty. Based on the literature reviewed, expected relationships are presented. 3.1 Consequences of Relational Benefits As outlined before, this study incorporates five different types of relational benefits customers can perceive from a tour operator being active on social media. The first type are social benefits. Research has shown that social benefits have a significant impact on customer loyalty and relationship commitment (cf. Hennig-Thurau et al., 2002, p.240). Although Hennig-Thurau et al. (2002) did not find support for a positive relationship between social benefits and customer satisfaction, Reynolds & Beatty (1999) did. Since the interaction between consumers and a firm s employees is an important factor of customer s perception of the quality of a service, social benefits proved to have a positive effect on customer satisfaction with the salesperson according to Reynolds & Beatty (1999, p.22). Moreover, these researchers found a significant effect of social benefits on customer loyalty to the salesperson. Since the salesperson is substituted by the tour operator being active on social media in this research, the next hypotheses were formulated: Hypothesis 1a: Social Benefits are positively associated with Customer e-satisfaction. Hypothesis 1b: Social Benefits are positively associated with Customer e-loyalty. Hypothesis 1c: Social Benefits are positively associated with Relationship Commitment. Great significance has been found for the impact of trust and confidence benefits on relationship satisfaction (cf. Hennig-Thurau et al., 2002, p.240; Yen & Gwinner, 2003, p.493) and loyalty (cf. Chang & Yen, 2007, p.106; Hennig-Thurau et al., 2002, p.240; Yen & 24

25 Gwinner, 2003, p.493). Furthermore, there seem to be contradictions in the literature about the effect of confidence benefits on relationship commitment. Berry (1995, cited in Hennig- Thurau et al., 2002, p.242), Ganesan and Hess (1997, cited in Hennig-Thurau et al., 2002, p.242) and Morgan and Hunt (1995, cited in Hennig-Thurau et al., 2002, p.242) all argued that trust in a service provider should lead to customer commitment. But according to Hennig-Thurau et al. (2002, p.241), there is only an indirect effect with relationship satisfaction as a mediator. To be sure not to exclude potential relationships, the following hypotheses were formulated: Hypothesis 2a: Confidence Benefits are positively associated with Customer e-satisfaction. Hypothesis 2b: Confidence Benefits are positively associated with Customer e-loyalty. Hypothesis 2c: Confidence Benefits are positively associated with Relationship Commitment. Parra-López et al. (2011, p.651) found that functional benefits had a significant effect on the intention to use social media. However, Wang & Fesenmaier (2004, p.718) did not find support for a positive relationship between functional benefits and level of participation in an online travel community. Because of the contradictions and the slightly different variables used in this study, the following hypotheses were formulated in order to be sure not to exclude potential relationships: Hypothesis 3a: Functional Benefits are positively associated with Customer e-satisfaction. Hypothesis 3b: Functional Benefits are positively associated with Customer e-loyalty. Hypothesis 3c: Functional Benefits are positively associated with Relationship Commitment. As it comes to special treatment benefits, more contradictions in literature can be found. Some research showed no significant effects of this type of benefits on customer satisfaction (cf. Hennig-Thurau et al., 2002, p.240) and customer loyalty (cf. Chang & Yen, 2007, p.106; 25

26 Hennig-Thurau et al., 2002, p.241), but according to Gwinner et al. (1998, p.109) and Yen & Gwinner (2003, p.492) it does have a significant effect. Though Hennig-Thurau et al. (2002, p.240) did not find support for the effect of special treatment benefits on customer satisfaction and customer loyalty, they did find support for the positive relationship between special treatment benefits and relationship commitment. Because of the contradictions, all potential relationships were included in the conceptual model in order to check whether these exist or not. Hypothesis 4a: Special Treatment Benefits are positively associated with Customer e- Satisfaction. Hypothesis 4b: Special Treatment Benefits are positively associated with Customer e- Loyalty. Hypothesis 4c: Special Treatment Benefits are positively associated with Relationship Commitment. Wang & Fesenmaier (2004, p.718) found little support for a positive relationship between hedonic benefits and level of participation in an online travel community. Once again, not wanting to exclude potential relationships, the next hypotheses were formulated: Hypothesis 5a: Hedonic Benefits are positively associated with Customer e-satisfaction. Hypothesis 5b: Hedonic Benefits are positively associated with Customer e-loyalty. Hypothesis 5c: Hedonic Benefits are positively associated with Relationship Commitment. 3.2 The influence of Customer Satisfaction and Relationship Commitment on Customer Loyalty Hennig-Thurau et al. (2002, p.241) state that relationship satisfaction and relationship commitment proved to be mediators between relational benefits and relationship marketing 26

27 outcomes. These mediators allow a full understanding of the relationship between relational benefits and customer loyalty. Their research showed that relationship satisfaction and relationship commitment have a strong and significant effect on customer loyalty (Hennig- Thurau et al., 2002, p.241). Reynolds & Beatty (1999, p.22) agree at this point by stating that customer satisfaction proved to have a positive influence on customer loyalty. However, Yen & Gwinner (2003, p.492) did not find support for this relationship. In terms of commitment, Gutek et al. (2000, cited in Yen & Gwinner, 2003, p.484) states that customers are more loyal when they are in a close relationship with an employee of a specific firm. Based on these studies, the following hypotheses were proposed: Hypothesis 6: Customer Satisfaction with the Tour Operator is positively associated with Customer Loyalty to the Tour Operator. Hypothesis 7: Relationship Commitment is positively associated with Customer Loyalty to the Tour Operator. Perceived quality of performance is a main determinant for satisfaction and consumers are provided with satisfactions apart from the products that are being sold (Reynolds & Beatty, 1999). Westbrook (1981, cited in Reynolds & Beatty, 1999, p. 14) states that consumers are able to experience satisfaction from an overall experience with the company and through its salespersons. In Reynolds & Beatty their research, satisfaction of salespersons and satisfaction of the company are included as separate variables, because they believe that customers are not only receiving benefits from their relationship with the company but from their salesperson-relationship as well. Satisfaction of a salesperson proved to have a positive impact on satisfaction of the company overall (Reynolds & Beatty, 1999, p.22). This is also confirmed by Goff et al. (1997), Oliver & Swan (1989) and Crosby et al. (1999) as stated by 27

28 Reynolds & Beatty (1999, p.14). In this study a similar relationship is expected, namely customers satisfaction with the tour operator being active on social media affecting the satisfaction of the tour operator as a whole. Therefore, the following hypothesis was formulated: Hypothesis 8: Customer e-satisfaction is positively associated with Customer Satisfaction with the Tour Operator. Reynolds & Beatty (1999) point out that there is also a difference between loyalty to a salesperson and loyalty to a company, because of the human contact that is included in a person-to-person relationship. Czepiel (1990) argues that this may be because trust, attachment and commitment which arise in person-to-person relationships form the foundation for person-to-firm relationships. A distinction was made between loyalty to a salesperson and loyalty to the company, despite the positive relationship that exists between the two. Loyalty to a salesperson is positively associated with loyalty to a company, only Reynolds and Beatty pointed out that there is a chance that customers would follow a leaving salesperson when the merchandise of the stores is similar. This is not the case in the field of this study, because the tour operator its employee being active on social media remains unknown for the customer. This potential relationship must not be excluded, wherefore a distinction was made between e-loyalty and loyalty to the tour operator itself as well: Hypothesis 9: Customer e-loyalty is positively associated with Customer Loyalty to the Tour Operator. Making a distinction between e-satisfaction and satisfaction with the tour operator overall and also between e-loyalty and loyalty to the tour operator overall, the next hypothesis was formulated based on the first hypothesis: 28

29 Hypothesis 10: Customer e-satisfaction is positively associated with Customer e-loyalty. Customer satisfaction proved to have a significant effect on relationship commitment in several studies (cf. Beatson et al., 2008, p.215; Hennig-Thurau et al., 2002, p.237; Hennig- Thurau & Klee, 1997, p.753; Park & Kim, 2008, p.158). Therefore, the following hypotheses were formulated: Hypothesis 11: Customer Satisfaction with the Tour Operator is positively associated with Relationship Commitment. Hypothesis 12: Customer e-satisfaction is positively associated with Relationship Commitment. 3.3 The influence of Relationship Commitment and Customer Satisfaction on Word of Mouth According to Hennig-Thurau et al. (2002, p.241), relationship commitment and relationship satisfaction give an understanding between relational benefits and word of mouth. Their research showed not only a significant effect of relationship satisfaction and relationship commitment on customer loyalty, but on word of mouth as well. Dimitriadis (2010, p.306) confirms the positive relationship between satisfaction and word of mouth. Pritchard et al. (1999, cited in Hennig-Thurau, 2002, p.232) have found a significant effect of commitment on customer loyalty in the hotel and airline industry. Gutek et al. (2000, cited in Yen & Gwinner, 2003, p.484) confirm this relationship as well, stating that customers are more willing to promote a firm when they are in a close relationship with an employee of the specific firm. Based on these findings, the following hypotheses were formulated: Hypothesis 13: Relationship Commitment is positively associated with Word of Mouth. Hypothesis 14: Customer e-satisfaction is positively associated with Word of Mouth. 29

30 Hypothesis 15: Customer Satisfaction with the Tour Operator is positively associated with Word of Mouth. 3.4 A graphical illustration of the proposed conceptual model The formulated hypotheses are summarized in figure 3, which illustrates the proposed conceptual model, measuring the influence of social media on customer loyalty in the travel trade. Figure 3: The proposed conceptual model Source: own design 30

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