International Journal of Hospitality Management

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1 International Journal of Hospitality Management 30 (2011) Contents lists available at ScienceDirect International Journal of Hospitality Management journal homepage: The relationships between CRM, RQ, and CLV based on different hotel preferences Shwu-Ing Wu, Pei-Chi Li National Chin-Yi University of Technology, Department of Business Administration, Taiwan, ROC article info abstract Keywords: Customer Relationship Management Relationship Quality Customer Lifetime Value This study uses Structural Equation Modeling (SEM) to investigate the strength of the relationships among Customer Relationship Management (CRM), Relationship Quality (RQ), and Customer Lifetime Value (CLV) from a consumer viewpoint. This study also investigates whether or not these relationship models show significant differences based on different hotel type preference groups. An analysis of 688 effective questionnaires produces two main findings. (1) CRM has a positive influence on RQ, and RQ has a positive influence on CLV. (2) Consumer groups with different hotel preferences reveal a partial interference effect on the relationships among CRM, RQ, and CLV. In other words, different hotel preferences create significant differences in the strength of partial relationship paths Elsevier Ltd. All rights reserved. 1. Introduction An enterprise which set up a Customer Relationship Management (CRM) system to find and keep its best customers and develop long-term relationships with loyal customers will acquire greater profits (Christy et al., 1996). Therefore, CRM has gradually been applied to the hotel industries to enhance the relationship between enterprise and its customers (Liu et al., 2007). Because the enterpriser believes that the relationship between a hotel and its customers is direct and intimate, the positive effects of CRM will significantly enhance the Relationship Quality (RQ) between hotel industries and their customers, increasing the hotel s Customer Lifetime Value (CLV) (Garbarino and Johnson, 1999; Kim and Cha, 2002; Leu and Hsieh, 2000). However, based on the customer s viewpoint, few studies have explored if these relationships exist; this is the major issue of this study. The competition in hotel industries is quite severe, thus hotels must improve their quality and services to win new customers. In addition to attracting more customers, hotels must also maintain the loyalty of existing customers because the cost of gaining new customers is approximately five times greater than the cost of keeping old customers (Rosenberg and Czepiel, 1984). As a result, CRM has become a hot topic in the hotel industry. In the customeroriented era, customers hold the key to a hotel s fate, and good customer relationships have become an important intangible asset for hospitality companies. A hotel must realize the real needs of its customers before it can effectively seize new business opportunities. Moreover, the relationship between a hotel and its customers is inseparable, making CRM a very important factor in maintaining RQ and enhancing CLV. Although most hotel enterprises make great efforts to improve their CRM practices to satisfy the needs of their customers, few enterprises know how much customers feel the effects of CRM actions. Therefore, this study investigates the influence of CRM on RQ factors such as customer satisfaction, trust and commitment in the hotel industry. This study also examines whether or not RQ enhances CLV factors such as customer usage quantity, loyalty, word of mouth, and purchase intentions. Most previous studies on CRM or CLV are based on the enterprise s point of view (e.g. Jae et al., 2004; Khirallah, 1999; Swift, 2001). However, this study takes the customer s viewpoint to investigate the implementation of CRM practices by a hotel, whether or not the RQ with customers will be improved, and whether or not the CLV can be further enhanced. In addition, this study investigates differences in the relationships among CRM, RQ, and CLV based on different hotel type preferences. Based on the research background and motivations that explore if relationships exist between CRM, RQ, and CLV based on the customer s viewpoint, the following describes the research objectives of this study: Corresponding author at: National Chin-Yi University of Technology, Department of Business Administration, No. 35, Lane 215, Section 1, Chungshan Road, Taiping, Taichung 411, Taiwan, ROC. Tel.: ; fax: address: [email protected] (S.-I. Wu). 1. To investigate the influence of CRM on RQ. 2. To investigate the influence of RQ on CLV. 3. To investigate differences in the relationships between CRM, RQ, and CLV based on different hotel type preferences /$ see front matter 2010 Elsevier Ltd. All rights reserved. doi: /j.ijhm

2 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) This study uses literature review to develop the research framework and questionnaire; then empirical study is used to produce its results. The hotel industry can use these results as a reference for employing CRM strategies. 2. Literature review and hypotheses 2.1. Customer Relationship Management (CRM) Spengler (1999) proposed that CRM should really be called Contact Management, which represents the specific collection of all information on the interaction between the customer and the company. A CRM system includes call center, database and customer care functions that support data analysis. CRM is an enterpriselevel strategy and business model that is based on the customer as the core, and uses information as a fulfillment tool. The major goal of CRM is to satisfy customer needs in time, to build strong and long term relationships with customers, and to increase business profit. In areas of severe enterprise competition, any business operation that strengthens customer loyalty is an indispensable competitive advantage. CRM represents the relationship between an enterprise and the customer, and the key is the relationship. In other words, an enterprise can positively affect customer behavior through effective communication and understanding. CRM can reinforce an organization s capability in acquiring customers, keeping customers and enhancing the value of customers. Therefore, the objective of CRM is to seize appropriate opportunities, and through appropriate channels, provide appropriate products and services to the appropriate customers. These measures make it possible to increase interactive opportunities (Swift, 2001). CRM is a commercial strategy for sales and service in which an enterprise serves its customers. Whenever there is this kind of interactive relationship, a company s messages will be exchanged with the appropriate customers (Kandell, 2000; Khirallah, 1999). Linoff (1999) pointed out that the objective of CRM is to keep customers that contribute to the enterprise, which is also a continuous improvement process. Swift (2001) proposed that CRM is a behavior in which an enterprise tries to understand and reach customers through full interaction; moreover, it is a business strategy that enhances customer loyalty and profit gaining Measurement of CRM This study uses the customer s perspective to investigate whether or not the customer is aware of CRM practices implemented by a hotel. This requires evaluating the level of consumer awareness of the presence of CRM actions by the hotel. Ming and Chen (2002) and Keeney (1999) found that customers needs for CRM actions include more diversified service channels, greater trust in hotel service, low service cost, quick access to services, extended service hours, easy access to services, privacy protection, and customized service. This study modifies the variables above to fit the hotel industry, and uses these items as CRM variables to evaluate customer s awareness of CRM practices in hotels Relationship Quality (RQ) Hennig-Thurau and Klee (1997) proposed that RQ represents the relationship between the customer and the enterprise, and this relationship depends on the level of customer satisfaction. Gummsson (1987) and Lee and Kim (1999) pointed out that RQ is the interaction quality between enterprise and customer, and can help to develop long term relationships. Crosby et al. (1990) found that when sales personnel emphasize RQ, they can reduce the insecurity and uncertainty experienced by the customer. This in turn can generate customer trust and confidence in the future performance of sales personnel, and will affect customer interactions in the future. Kumar et al. (1995) proposed that RQ reflects customer trust, commitment, conflict, expectation of continuity, and willingness to invest. Smith (1998) proposed that multiple factors contribute to RQ. The relationship between customer and company is positively related to the strength of the mutual satisfaction and expectations on both sides. Garbarino and Johnson (1999) pointed out that RQ includes satisfaction, trust and commitment, aspects which positively influence customers future intentions Measurement of RQ RQ is an important index for evaluating the strength of the relationship between the supplier and customer. Many researchers agree that customer trust, satisfaction and commitment, are key factors in evaluating RQ. For example, Crosby et al. (1990) and Tam and Wong (2001) proposed that satisfaction and trust are key aspects of RQ; Mohr and Spekman (1996), Morgan and Hunt (1994), and Sanchez-Garcia et al. (2007) stated that trust and commitment are key factors in evaluating RQ. Chakrabarty et al. (2007), Garbarino and Johnson (1999), Ivens (2004), Ndubisi (2006), and Smith (1998) concluded that RQ is formed by satisfaction, trust and commitment. Thus, this study integrates the three items above to measure RQ. The following sections describe these factors in greater detail. Trust means that the customers believe sales personnel will provide them with long-term benefit and service (Crosby et al., 1990). Doney and Cannon (1997) pointed out that trust is the reputation and level of caring exhibited by the opposite side as recognized by the decision maker on the target to be trusted, and includes objective reputation and psychological care. Garbarino and Johnson (1999) thought that trust is customer confidence in the quality and reliability of the service provided by the organization. Lee and Kim (1999) thought that trust is the level of confidence and willingness in the mind of a consumer. That is, consumer trust depends on the confidence and willingness to deal with a company, and such willingness originates from the reliability, integrity and honesty of the company (Moorman et al., 1993). Customer satisfaction means the satisfaction of the customer during or after the purchase of a product or service, interaction with service personnel, and entire experience provided by the company compared to other companies (Selnes, 1993). Westbrook (1980) pointed out that satisfaction is a recognition and evaluation process in which customers compare their actual experience with their previous expectations. If a product meets or exceeds these expectations, the customer feels satisfied. Bearden and Teel (1983) and Oliver et al. (1997) thought that customer satisfaction means the level of like or dislike after consumption, which is an attitude based entirely on experience. Thus, the overall customer satisfaction is a key determinant of RQ (Ndubisi, 2006). Customers commitment is very important to maintaining a relationship with the other side. Commitment to the relationship on the part of both partners is a key factor to successful RQ in the long run, and helps to enhance long-term benefits (Morgan and Hunt, 1994). Moorman et al. (1993) and Goodman and Dion (2001) thought that commitment occurs when one of the partners wants to continue and reinforce the relationship. Anderson and Weitz (1991) proposed that commitment includes the desire to develop a stable relationship, the willingness to make short term sacrifices for a long-lasting relationship, and having confidence in the stability of the relationship. To ensure the content validity of the scales, the measurement items were selected and modified from prior studies. The measures for Trust, Customer satisfaction and Customer commitment

3 264 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) are based on Sanchez-Garcia et al. (2007), Chakrabarty et al. (2007), and Ndubisi (2006) Customer Lifetime Value (CLV) Dwyer (1989) proposed that CLV is the net value of the expected profit of the enterprise minus the related cost. Kotler (1997) pointed out that CLV is the net profit obtained from a certain customer over the lifetime of that customer, as s/he continues to purchase products from the company. Thus, CLV is the profit produced by all of the steps that an enterprise takes to maintain a relationship with the same customer (Levin, 1999). Blatterg and Deighton (1996) pointed out that not all customers are the same; as the competition in the market becomes more severe, keeping valuable customers becomes more important to enterprises. According to the 80/20 principle (Pareto Principle), 20% of the customers bring the enterprise 80% of the profit (Berry, 1995). Therefore, determining how to hold onto that 20% of the customers and to how to measure their CLV are very important topics Measurement of CLV CLV is the net value of the profit that an enterprise, over a certain period of years, will earn from an average customer. CLV contains the following four evaluation indexes: retention rate, annual sales, direct cost, and interest rate (Hughes, 1994). Kim and Cha (2002) measured CLV by customers shares of purchase, relationship continuity and word of mouth. McDonald (1996) proposed that CLV can be evaluated by two important aspects: (1) Core relationship, which includes two items: Usage factor: This is the duration and strength of the relationship between the company and the customer, that is, the contact frequency or usage quantity of the customer. Fan identification: This represents the customer s personal commitment and affection, such as loyalty. (2) Extension relationship, which includes two items: Product merchandising: This is the purchase intention as affected by sales and communication tools. Word of mouth: This measures the effect of the products and services provided by the company based on the recommendations of existing customer to potential customers. This study evaluates CLV based on the consumer s perspective. Therefore, usage quantity, loyalty, purchase intention, and word of mouth serve as CLV measurement indices. The measurement items for CLV were adapted from the study of Kim and Cha (2002), and McDonald (1996) The relationship between CRM and RQ CRM can reduce consumers transaction cost or uncertainty, which in turn enhances the relationship between the customer and the enterprise. Crosby et al. (1990) proposed that CRM can enhance RQ, an important factor in evaluating whether the relationship between the enterprise and the customer is strong or weak, good or bad (Kumar et al., 1995; Storbacka et al., 1994). Garbarino and Johnson (1999) found that customers with a stronger relationship to the enterprise have more positive recognition of the enterprise s CRM actions, and generally more positive views of RQ factors, such as: degree of trust, satisfaction and commitment. Since trust, satisfaction and commitment are foundational to RQ (Garbarino and Johnson, 1999), CRM clearly has a positive influence on RQ. Therefore, this study proposes the following hypotheses: H1. When customers better recognize the CRM actions of a hotel, they will view RQ more positively The relationship between RQ and CLV The final objective of CRM for the enterprise is to increase Customer Lifetime Value. Therefore, the effect of CRM is ultimately to enhance CLV through RQ (Jackson, 1989). Pepper and Rogers (1993) found that customers with high RQ will recommend a product through word of mouth to relatives and friends. These customers are more willing to re-purchase and also have higher loyalty. Moreover, customers with high loyalty will contribute to a company s profit over the long term and increase the sales and profits of the company. Crosby et al. (1990) pointed out that RQ influences customer loyalty. Garbarino and Johnson (1999) found that RQ affects the willingness of customers to either stay or leave in the future. Keaveney (1995) also found that the RQ between the customer and the enterprise is a key factor in the loyalty of a customer. Kumar et al. (1995) thought that better RQ reduces the conflict between the customer and the enterprise, enhances customer loyalty to the enterprise, enhances customer willingness for continuing transactions, and increases customer usage quantity. Leu and Hsieh (2000) found that RQ has a significant influence on customer usage quantity, loyalty, product purchase intentions, and word of mouth. These findings indicate that higher customer satisfaction with RQ creates a positive effect on the customer s view. This in turn increases the company s profit and improves CLV. To summarize the findings above, a positive correlation exists between RQ and CLV. This study measures CLV by usage quantity, loyalty, word of mouth, and purchase intention, and proposes the following hypotheses: H2a. H2b. H2c. H2d. RQ has a positive influence on the CLV usage quantity. RQ has a positive influence on CLV loyalty. RQ has a positive influence on CLV word of mouth. RQ has a positive influence on CLV purchase intentions Difference of hotel types According to Tourism Bureau of the Ministry of Transportation and Communications of Taiwan (2008), there were 90 tourism hotels, 2613 general hotels, and 2519 guesthouses in Taiwan. A tourism hotel is a leisure service business that provides lodging and related leisure services to tourists. A general hotel has the primary business of providing lodging and rest services. A guesthouse is operated through the use of a spare room in a private home, and is often associated with locals, natural landscapes, ecology, environmental resources and agricultural, forestry, etc. Guesthouses are usually operated as a family side business to provide rural-style lodging to tourists. In business operation aspects, tourism hotels, general hotels, and guesthouses are very different. For example, guesthouses emphasize a service charge that suits the public and self-assisted service; the facility is not luxurious, but is filled with lots of special features. Although the service may not be fancy, it offers lots of fun, a rural nature, etc. It is often associated with local natural resources and cultural features to provide unique lodging and dining service (Taiwan Leisure Farming Development Association, 2004). General hotels, on the other hand, do not emphasize cultural features, and focus instead on providing convenient lodging services. Tourism hotels, in addition to providing more professional service, provide software and hardware which are better and of a higher class than those provided by guesthouses and general hotels.

4 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) Customer Relationship Management (CRM) H 1 Relationship Quality (RQ) Satisfaction Trust Commitment H 2a H 2b H 2c H 2d Customer Lifetime Value (CLV) Usage Quantity Loyalty Word of Mouth Purchase Intention not clear, and these were revised or had examples given for better description. After correcting the questionnaire, convenience sampling was again used to select 62 people for a sample pilot test. The data collected was then analyzed for reliability and validity. The results of this pilot test indicated that Cronbach s values of measurement perspectives were all greater than 0.7. The factor loadings of all questionnaire items were also greater than or close to 0.5, which meets the standards of reliability and validity (Hair et al., 2006; Nunnally, 1978). Hence, the resulting survey was used as the formal questionnaire for a large-scale survey. H 3 Comparison of consumer groups with different preferences on hotel types Fig. 1. Research framework. 4. Research results and discussion 4.1. Sampling To summarize the above, many differences exist among tourism hotels, general hotels, and guesthouses. Their respective CRM strategies also differ, and thus have different influences on RQ and CLV. This study also explores if differences exist with customer groups with different hotel preferences. Therefore, we measure which type of hotel customers prefer when they travel in Taiwan, and propose the following hypothesis: H3. Consumer groups with different hotel preferences will exhibit differences in the relationships among CRM, RQ, and CLV. 3. Research design 3.1. Research framework To sum up the literature review and research hypothesis, this study uses the research framework depicted in Fig. 1. A questionnaire design and sampling survey verify the research hypothesis. This study investigates the correlation between CRM and RQ formed by customers satisfaction, trust and commitment, and evaluates the influence of RQ on four CLV factors: usage quantity, loyalty, word of mouth, and purchase intentions. In addition, this study compares the effect of different hotel preferences on these relationship models Questionnaire design The initial draft of the measurement variables was first designed according to the theory and literature reviewed above. Next, an indepth interview was performed on 30 consumers to collect views and opinions regarding CRM, RQ and CLV held by consumers who stayed at hotels or guesthouses in Taiwan. The main purpose of this study was to understand consumer viewpoints and behavior and use them as reference and a basis for designing the questionnaire. After repeated discussions and corrections by a focus group of 8 researchers, the questionnaire was then generated in four parts: hotel types, CRM, RQ, and CLV. The first section adopted a nominal scale for evaluation; the other three sections used a Likert sevenpoint scale with a score of 1 to 7: the higher the score, the higher the degree of agreement (see Table 1) Pre-test and pilot To acquire an effective measurement scale, two stages of pretest and pilot were used to correct the questionnaire before the formal survey. For the pre-test, convenience sampling was used to select 35 consumers who experienced staying at a hotel or guesthouse, and these 35 people were given in-depth interviews. The results of these interviews revealed that some of the questions were This study selected Taiwanese consumers who stayed at their preferred hotels or guesthouses during the past year as the main research subjects. We collected the data by convenience sampling method at hotels and guesthouses, and sampled people. The responders were asked to fill in a questionnaire about their preferred hotels or guesthouses. We gathered data from 775 respondents via personal-interviews during two months, from March 2009 to May After excluding 40 invalid questionnaires and 47 questionnaires that could not be classified by lodging type, the valid questionnaires totaled 688 copies, for an effective return rate of 88.77%. The sample structure was then divided into two parts based on personal background and consumption data for analysis (as shown in Appendix A). Personal background information shows that interviewees were 65.4% females and 34.6% males; 48.1% of them were aged years old, 24.9% were aged 31 40, and 13.7% were aged 41 50; 27.6% of respondents were high school graduates and 63.4% had college degrees; 24.3% were students, 10.3% worked in government, 7.8% worked in manufacturing, 14.7% worked in the commercial industry, and 32.7% worked in the service industry; many (46.2%) earned an average personal monthly income of US dollars, followed by those who earned (40.3%) under 750 US dollars. The backgrounds of responders included various characteristics, thus making the sample structure suitable. Beside, a survey performed by Eastern Online (2005) indicates that the high consumption capability of single females aged years old has caught the attention of hotel enterprises. The chief economic advisor of Visa Card (Wong, 2007) pointed out that the consumption power of Asian females is rising rapidly, and the main consumption target for these female consumers is leisure and entertainment related to fashion, for example, the visit of spring SPA and tourism. These phenomena agree with the characteristics of the sample in this study, which can therefore be used to represent the consumption status of Taiwan s hotel market. The consumption data indicates that most consumers stayed at hotels during recent one year and the average interval duration of lodging in a hotel was more than two years. The average room price ranged from 60 to 100 US dollars for a 2-person room. The average lodging duration was 2 days, and the main lodging purpose was leisure vacation. The only major difference is that the average period of lodging in a general hotel was one day, which shows that consumers prefer to stay at general hotels for shorter periods Reliability and validity analysis This study uses exploratory factor analysis, Cronbach s, and correlation coefficient to test the validity and reliability of valid questionnaires. After reliability and validity testing, two CRM items and two CLV items with factor loading lower than 0.5 were

5 266 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) Table 1 Measurement variables. Measurement perspective Items References Hotel types CRM RQ Satisfaction Trust Commitment CLV Usage quantity Loyalty Word of mouth Purchase intention a Deleted item. Which type of hotel you prefer to stay? (tourism hotel, general hotel, or guesthouse) A1: The company has provided customized service. A2: The company has a privacy protection policy. A3: Searching for information about the company is easy. A4: The company provides detailed maps and transportation guides. A5: The service times of the company meet customer requirements. A6: The company provides a convenient room reservation service. A7: The company provides a convenient payment process. A8: The company provides a convenient and easy to use facility. A9: The company cares for customer s need eagerly. A10: The company replies to customer opinions. The company has a member program. a A11: The company has a website. A12: The company has convenient interactive communication channel. The company has questionnaire survey policy for customer. a B1: The services provided by the company give us wonderful experience. B2: The environment of the company satisfies me. B3: The service attitude of company employees satisfies me. B4: The professional knowledge of company employees satisfies me. B5: The company met my expectations. B6: The service provided by the company is trustworthy. B7: The information provided by the company is accurate. B8: The company will take customer s benefit as the first priority. B9: The company deals with customers honestly. B10: The company is dependable. B11: The company meets its commitments to customers. B12: I would like to maintain a good relationship with the company. B13: I care about the development of the company. B14: I am happy to provide suggestions to the company for its products or services. B15: If the company sells a membership card or lodging ticket, I would like to buy it. I come to the company for lodging almost every year. a C1: I am willing to purchase from this company again. C2: The money I spend here is well-spent. C3: I would like to buy more from this company. C4: I am a loyal customer of this company. C5: I would still use the services of this company even if another company offers me a promotional or favored price. C6: Even if the price increases, I still would like to go to this company for lodging. C7: When I need travel or lodging, this company is my best choice. If I cannot shop in the company again, I would take it as a loss. a C8: If someone asks me for information on a related product, I provide them with information about this company. C9: I would like to share my consumption experience from this company with others. C10: I would like to register as a member of the company and share my opinions on its advantages. C11: I would like to, through my introduction, let my relatives and friends become loyal customer of this company. C12: I will purchase this company s product or service. C13: I will repeat purchase this company s product. C14: I will consume a new product through the promotion from the service personnel of the company. C15: I hold positive attitude toward this company. Tourism Bureau of the Ministry of Transportation (2008) Ming and Chen (2002) and Keeney (1999) Sanchez-Garcia et al. (2007); Ndubisi (2006); Chakrabarty, Whitten & Green (2007) McDonald (1996); Kim and Cha (2002). removed, and the analysis was performed again. Through factor analysis and the varimax method, the 14-items of CRM were coalesced into one factor; RQ was further divided into three dimensions; and CLV was further divided into four dimensions in all three types of hotels. The results meet the concepts of previous researches (e.g. Chakrabarty et al., 2007; McDonald, 1996; Ndubisi, 2006). We tested every factor and dimension again (shown in Table 2), and the results showed that Cronbach s of each factor or dimension ranged from to 0.951, which meets the requirement of 0.7 or greater. This means that the reliability of each measurement factor is high (Nunnally, 1978). The validity analysis results show that the eigenvalues of factors are greater than 1, the cumulative explained variances are all greater than 0.5, factor loadings of items are all greater than 0.5, and the correlation coefficients of item to total are all greater than 0.5, which means that all of the measurement factors and dimensions have convergent validity (Hair et al., 2006). In addition, the question items were designed according to theory and literature, and examined and corrected by experts. Finally, they were tested by pre-test, pilot and focus groups to confirm the

6 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) Table 2 Reliability and validity analysis. Perspectives Tourism hotel Eigenvalue Cumulative explained variance (%) Cronbach s CRM RQ Satisfaction Trust Commitment CLV Usage quantity Loyalty Word of mouth Purchase intention Perspectives General hotel Eigenvalue Cumulative explained variance (%) Cronbach s CRM RQ Satisfaction Trust Commitment CLV Usage quantity Loyalty Word of mouth Purchase intention Perspectives Guesthouse Eigenvalue Cumulative explained variance (%) Cronbach s CRM RQ Satisfaction Trust Commitment CLV Usage quantity Loyalty Word of mouth Purchase intention content of the formal questionnaire. Therefore, we are confident that these measurement scales have content validity. Furthermore, this study uses the theory and empirical cases presented by previous scholars and experts as references for constructing the research structure and measurement scales. Hence, the research framework and measurement scale possess nomological validity Interactive relationship analysis This study uses Structural Equation Modeling (SEM) to test the interrelated dependence relationships among multiple variables. Meanwhile, the fitness of a model is judged by the rules of an excellent model s ratio of chi-square value to degree of freedom ( 2 /df) which should not be larger than 3 (Carmines and MacIver, 1981); the RMR should be smaller than 0.08 and RMSEA should be smaller than 0.05, and GFI, AGFI, NFI, RFI, and CFI should be larger than 0.9 (Bagozzi and Yi, 1988; Joreskog and Sorbom, 1989). Fig. 2 shows the relationship model in this study. For the three consumer groups of different hotel preferences, this study performs SEM analysis on three relationship models. The results show that the model fitness for all three models reach or come close to the target value. Therefore, the three relationship B1 B2 B3 B4 B5 B12 B13 B14 B15 Satisfaction B6 B7 B8 B9 B10 B11 Usage Quantity Trust Commitment A1 A2 A3 A4 A5 A6 A7 A8 A9 A10A11 A12 Loyalty Customer Relationship Management Relationship Quality Word of Mouth Purchase Intention C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13C14C15 Fig. 2. Relationship model. models of different hotel types are acceptable, as Table 3 shows. In addition, the results in Tables 4 6 all show that significant and positive relationship exists between measurement indicators and their latent variables, which means that the three relationship models of different hotel types are effective. SEM analysis reveals that the relationship paths of the three models of different hotel types are the same. The results in Table 7 show that a significant and positive relationship exists between CRM and RQ, which means that CRM has a strong and positive influence on RQ. When customers have more appreciation for the Table 3 Fitness of relationship models of different preference groups. Model fit criteria Tourism hotel (221) General hotel (266) Guesthouse (201) df /df P value RMR GFI AGFI NFI RFI CFI RMSEA Table 4 Estimates of regression weight for measurement indicators of CRM. Measurement indicators Estimates of regression weight Tourism hotel (221) General hotel (266) Guesthouse (201) CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** CRM A *** *** *** *** P <

7 268 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) Table 5 Estimates of regression weight for measurement indicators of RQ. Measurement indicators Estimates of regression weight Tourism hotel (221) General hotel (266) Guesthouse (201) RQ satisfaction *** *** *** RQ trust *** *** *** RQ commitment *** *** *** Satisfaction B *** *** *** Satisfaction B *** *** *** Satisfaction B *** *** *** Satisfaction B *** *** *** Satisfaction B *** *** *** Trust B *** *** *** Trust B *** *** *** Trust B *** *** *** Trust B *** *** *** Trust B *** *** *** Trust B *** *** *** Commitment B *** *** *** Commitment B *** *** *** Commitment B *** *** *** Commitment B *** *** *** *** P < Table 6 Estimates of regression weight for measurement indicators of CLV. Measurement indicators Estimates of regression weight Tourism hotel (221) General hotel (266) Guesthouse (201) Usage quantity C *** *** *** Usage quantity C *** *** *** Usage quantity C *** *** *** Loyalty C *** *** *** Loyalty C *** *** *** Loyalty C *** *** *** Loyalty C *** *** *** Word of mouth C *** *** *** Word of mouth C *** *** *** Word of mouth C *** *** *** Word of mouth C *** *** *** Purchase intention C *** *** *** Purchase intention C *** *** *** Purchase intention C *** *** *** Purchase intention C *** *** *** *** P < CRM actions offered by a hotel, then the RQ is better. These results support H1 and agree with the research of Garbarino and Johnson (1999). The relationship analysis of RQ and CLV shows that the RQ has a significant positive influence on consumers usage quantity. The results of all three models show that the better the RQ, the higher the usage quantity. These results support H2a and agree with the research of Kumar et al. (1995). Furthermore, a positive and significant correlation exists between RQ and loyalty, which means that the better the RQ, the higher the customer loyalty. This finding supports H2b and agrees with the research results of Keaveney (1995). RQ and word of mouth are also significantly and positively correlated, meaning the better the RQ, the better the word of mouth. These results support H2c and agree with Pepper and Rogers (1993). Finally, RQ has a significant and positive influence on consumer purchase intentions, which means that the better the RQ, the better the purchase intentions. This supports H2d and agrees with the research of Leu and Hsieh (2000) Comparison of relationship models This study uses multi-group analysis of competing models to compare the relationship models of different hotel preference groups (tourism hotels, general hotels, and guesthouses). The main objective of this analysis is to find any differences in different preference groups in the relationships among CRM, RQ, and CLV. The fitness indexes of the competing model all meet or come close to their target values, indicating that this competing model is acceptable (as Table 7 indicates). The comparison results show that although the three models have the same relationship structures, the relationship strength of some paths differs. The following section provides detailed discussion of the results of comparing the standardized parameter estimation values of the three relationship models (as in Table 7): (1) In the influence of CRM on RQ, the T-test results show that the three models do not show significant differences. This means that no significant difference exists in the strength of the influence of CRM on RQ for all three groups, that is, all paths exhibits a positive and strong relationship. (2) In the influence of RQ on CLV usage quantity, the three models all show a strong path relationship. However, the T-test results indicate that a significant difference exists between consumers who prefer tourism hotels and those who prefer guesthouses (t = 2.170). A significant difference also exists between consumers who prefer tourism hotels and those who prefer general hotels (t = 1.824). Results show that consumers who prefer guesthouses or general hotels feel that RQ will have greater influence on usage quantity than do consumers who prefer tourism hotels. All these results show that tourism hotels have a lower strength on this path relationship. (3) Consumers with different hotel preferences all show a strong relationship in the influence of RQ on loyalty of CLV. However, Table 7 The comparison between different preference groups. Relationship path Standardized parameter estimates T-test Tourism hotel General hotel Guesthouse Tourism hotel vs. general hotel Tourism hotel vs. guesthouse General hotel vs. guesthouse CRM RQ *** *** *** RQ usage quantity *** *** *** * ** RQ loyalty *** *** *** 2.59 *** *** RQ word of mouth *** *** *** *** *** RQ purchase intention *** *** *** ** df 2 /df P value RMR GFI AGFI NFI RFI CFI RMSEA Fitness of competing model * P < ** P < *** P <

8 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) the T-test results show that a significant difference (t = 2.732) exists between consumers who prefer tourism hotels and those who prefer guesthouses. A significant difference (t = 2.59) also exists between consumers who prefer tourism hotels and those who prefer general hotels. This means that consumers who prefer either guesthouses or general hotels feel that RQ has a greater influence on loyalty than do those who prefer tourism hotels. These results show that tourism hotels have the lowest strength in this relationship path. (4) In the influence of RQ on CLV word of mouth, T-test results show that a significant difference (t = 2.705) exists between consumers who prefer tourism hotels and those who prefer general hotels. Moreover, a significant difference (t = 2.617) exists between consumers who prefer tourism hotels and those who prefer guesthouses. These results also show that tourism hotels have the lowest strength in this relationship path. (5) Finally, in the influence of RQ on CLV purchase intentions, T- test results show that a significant difference (t = 2.306) exists between consumers who prefer tourism hotels and those who prefer guesthouses. This means that the effect of RQ on purchase intentions is greater for consumers who prefer guesthouses than for those who prefer tourism hotels. To summarize the findings above, consumer groups with different hotel preferences exhibit slight significant differences in the strength of the relationships between CRM, RQ and CLV. This result provides partial support for H3. However, there is no significant difference between consumers who prefer general hotels and those who prefer guesthouses. Research results show that a CRM strategy has a significantly lower effect on tourism hotels than on general hotels or guesthouses. 5. Conclusions and suggestions 5.1. Conclusions and discussion This study investigates the consumer views on CRM, RQ and CLV for three kinds of hotels: tourism hotels, general hotels, and guesthouses, and the differences in these relationships based on hotel type. This study develops an effective measurement scale and relationship model, and provides the following conclusions The effect of CRM The results of this study show that when customers show higher awareness on the CRM actions of the hotel, the recognized RQ will be better; meanwhile, the better the RQ, the higher the four dimensions of CLV, individually. This result suggests that all kinds of hotels should emphasize CRM actions based on cost/benefit concept since the effects of CLV on usage quantity, loyalty, word of mouth, and consumer s purchase intentions all can be enhanced by maintaining RQ between enterprise and customer. Meanwhile, the effect of RQ can be enhanced by implementing CRM Comparison of consumer groups with different hotel preferences Study results and a comparison between consumer groups show that no significant difference exists in the relationship strength for the influence of CRM on RQ for the three hotel preference groups. All three groups exhibit positive strong relationships. However, the general hotel group has more recognition of the effect of RQ on the three dimensions of CLV (usage quantity, loyalty and word of mouth) than the tourism hotel group does. In addition, focusing on the influence of RQ on the all four dimensions of CLV, consumers who prefer guesthouses show a higher recognition of the influence of RQ on CLV than do consumers who prefer tourism hotels. This implies that hotel type is an important interference factor. Consumers with different hotel preferences do indeed have different views of RQ and its effects on CLV. This result can be used as a reference by different hotels in preparing their CRM strategies Managerial implications This study shows that when a hotel implements CRM activities, it will indeed positively affect RQ and further enhance customer usage quantity, loyalty, word of mouth, and purchase intention. Moreover, comparative analysis shows that consumers with different hotel preferences exhibit significant differences in some relationship paths. Consumers with a preference for general hotels exhibit a stronger RQ influence on loyalty and RQ influence on word of mouth. Thus, customer loyalty and word of mouth will be competitive advantages for general-type hotels. Therefore, general hotels should focus on providing convenient lodging services and a wonderful experience to customers for increased loyalty, such as offering a clean environment, convenient service process, and professional employees to satisfy customers expectations. On the other hand, consumers with a preference for guesthouses show a stronger CRM influence on RQ, RQ influence on usage quantity, and RQ influence on purchase intentions. Therefore, guesthouses should maintain their CRM and RQ efforts to enhance consumer usage quantity and purchase intentions, such as maintaining an association with local resources and culture to provide a unique service, as well as providing detailed maps, transportation guides, convenient room reservation service, and an interactive communication channel. Consumers with a preference for tourist hotels exhibit a weaker relationship between RQ and CLV. Thus, besides improving CRM activities to enhance its RQ with consumers and reinforce the effects of CLV, tourist hotels should provide more professional service and new facilities to attract new consumers and spur repeat business by loyal customers. Since the professional service, innovative software and hardware facilities are the core competitive advantage of tourism hotels, tourism hotels should provide customized service, provide information searching system and website to reply to customers opinions and queries, provide an innovative and useful facility, and perform surveys to understand customers needs (Taiwan Leisure Farming Development Association, 2004). Because previous studies perform fewer comparisons of consumer groups of different hotel preferences on the CRM relationship model, the analysis result of this study, can not only construct the related influential factors and concept framework, but also provide references to different hotel enterprises to prepare CRM strategy and enhance efficiency. Thus, this study possesses both academic value and practical contributions Limitations and future research Since different types of hotels will conduct different CRM activities, this study might not be able to introduce all the CRM actions of all types of hotels. Subsequent studies can set up more suitable variables by surveying more multi-element literature or conducting enterprise surveys to further analyze the differences of CRM effectiveness between different CRM actions. Since previous studies showed that RQ (which aggregate customers satisfaction, trust, and commitment) had a positive relationship with repeat purchase, usage quantity, loyalty, and word of mouth (Kim et al., 2001; Kim and Cha, 2002), we therefore aggregate the three dimensions of RQ to explore the influence of RQ on the four dimensions of CLV. Furthermore, future research should measure the individual dimensions of RQ and explore the

9 270 S.-I. Wu, P.-C. Li / International Journal of Hospitality Management 30 (2011) relationship between CRM and the three dimensions of RQ, and the relationships among the three dimensions of RQ and the four dimensions of CLV individually. This study takes the customer s viewpoint to investigate customer perceptions of CRM, RQ and CLV. The results provide some important information about CRM, RQ and CLV from customers for enterprises. However, management and customers may not have the same definitions of the three constructs. Therefore, the perception differences between management and customers should be the subject of further research. This study surveyed domestic travelers only. Therefore, the findings can lead to further research in other countries for generalizing to the general public. Moreover, different target groups or industry types may generate different research results. Future research should investigate other industries, for example, restaurants or the travel industry. Hopefully, such studies will confirm the practicality of the conceptual framework in this study. Appendix A. The demographic and consumption data Category Items Tourism hotel General hotel Guesthouse Total Gender Male 87(39.4%) 92(34.6%) 59(29.4%) 238(34.6%) Female 134(60.6%) 174(65.4%) 142(70.6%) 450(65.4%) Age Under 21 15(6.8%) 28(10.5%) 13(6.5%) 56(8.1%) (38.9%) 128(48.1%) 117(58.2%) 331(48.1%) (29.4%) 59(22.2%) 47(23.4%) 171(24.9%) (17.6%) 37(13.9%) 18(9.0%) 94(13.7%) More than 50 16(7.2%) 14(5.3%) 6(3.0%) 36(5.2%) Education Junior high school 11(5.0%) 15(5.6%) 7(3.5%) 33(4.8%) Senior high school 50(22.6%) 68(25.6%) 39(19.4%) 157(22.8%) College 138(62.4%) 161(60.5%) 137(68.2%) 436(63.4%) Graduate school 22(10.0%) 22(8.3%) 18(9.0%) 65(9.0%) Background or occupation Student 43(19.5%) 75(28.2%) 49(24.4%) 167(24.3%) Worked in government 27(12.2%) 31(11.7%) 13(6.5%) 71(10.3%) Worked in manufactory 14(6.3%) 19(7.1%) 21(10.4%) 54(7.8%) Worked in commercial 43(19.5%) 34(12.8%) 24(11.9%) 101(14.7%) Worked in service industry 67(30.3%) 89(33.5%) 69(34.3%) 225(32.7%) The others 27(12.2%) 18(6.8%) 25(12.4%) 70(10.2%) Personal monthly income (US $) Under (31.7%) 122(45.9%) 85(42.3%) 277(40.3%) (45.7%) 115(43.2%) 102(50.7%) 318(46.2%) (14.5%) 21(7.9%) 7(3.5%) 60(8.7%) More than (8.1%) 8(3.0%) 7(3.5%) 33(4.8%) Stayed at preferred hotel during recent time One year ago 111(50.2%) 134(50.3%) 83(41.3%) 328(47.7%) Nine months ago 31(14.0%) 39(14.7%) 45(22.4%) 115(16.7%) A half year ago 40(18.1%) 50(18.8%) 49(24.4%) 139(20.2%) Three months ago 21(9.5%) 14(5.3%) 11(5.5%) 46(6.7%) One month ago 18(8.1%) 29(10.9%) 13(6.5%) 60(8.7%) The average interval duration of lodging in a hotel More than two years 120(54.3%) 160(60.2%) 118(58.7%) 398(57.8%) Two years 30(13.6%) 23(8.6%) 22(10.9%) 75(10.9%) One year 43(19.5%) 56(21.0%) 38(18.9%) 137(19.9%) A half year 22(10.0%) 21(7.9%) 15(7.5%) 58(8.4%) Three months or below 6(2.8%) 6(2.2%) 8(4.0%) 20(2.9%) Types of preferred room 2-Person room 138(62.4%) 134(50.4%) 105(52.2%) 377(54.8%) 4-Person room 76(34.4%) 111(41.7%) 75(37.3%) 262(38.1%) 6-Person room 7(3.2%) 21(7.9%) 21(10.4%) 49(7.1%) Expense per room (US $) Under 60 26(11.8%) 90(33.8%) 70(34.9%) 186(27.0%) (42.1%) 123(46.2%) 109(54.2%) 325(47.3%) (20.8%) 19(7.1%) 11(5.5%) 76(11.1%) More than (25.3%) 34(12.8%) 11(5.5%) 101(14.7%) The average duration of lodging in a hotel once time One day 91(41.2%) 141(53.0%) 77(38.3%) 309(44.9%) Two days 104(47.1%) 109(41.0%) 105(52.2%) 318(46.2%) Three days 11(5.0%) 9(3.4%) 15(7.5%) 35(5.1%) More than three days 15(6.8%) 7(2.6%) 4(2.0%) 26(3.8%)

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