An Integrated Online Customer Loyalty Model

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1 An Integrated Online Customer Loyalty Model Christine Tam Tsui Wa Department of Business Studies, The Hong Kong Polytechnic University, Hung Hom, Kolwoon, Hong Kong Telephone : (852) ; Fax: (852) ; [email protected] Acknowledgement: The author takes this opportunity to express appreciation to Dr. Thomas Leung for suggestions and the financial support from the Hong Kong Polytechnic University.

2 ABSTRACT Investigations have been conducted to examine various constructs influencing customer loyalty over the Internet, such as ease of use (Dabholkar, 1996; Hoffman and Novak, 1996), usefulness (Davies et al. 1989; Igbaria et al., 1996; Philips et al., 1997) and enjoyment (Igbaria, Schiffman, and Wie chowski, 1995; Igbaria et al., 1996). However, there is no research to date to integrate these constructs to evaluate the relative impacts on online customer loyalty (Chen, 1999; Venkatesh and Davies, 1996). Thus, this study aims to fulfill this gap in the literature by proposing an integrated model to see how these constructs contribute to online customer loyalty. INTRODUCTION Numerous studies, both industry-based and academic, have been conducted in the interest of developing a better understanding of the relationships among quality, satisfaction, and loyalty. Very few studies, however, have examined this full set of variables simultaneously. Moreover, the business-to-consumer encounters are increasingly taking place in technology-mediated settings in a global environment (Meuter et al., 2000), but an integrated online customer loyalty model does not exist with a comprehensive instrument specifically designed to focus on the consumer s perception of the quality of a website in the context of predicting whether that website will be revisited. This paper seeks to address that gap, utilizing as a general underlying model the Theory of Reasoned Action (TRA) (Ajzen et al., 1980) and particularly the TRA as applied to the utilization of information technology in the Technology Acceptance Model (TAM) (Davies et al., 1989). The purpose of this study is to provide a better understanding of the relationships among quality, satisfaction, and loyalty when customers use online portals. Three research objectives ser ved to guide the development of an integrated online customer loyalty model. The first objective was to investigate the relationships among quality, satisfaction, and loyalty in online environment, especially in a portal. The second research objective was to develop the dimensions to be used in measuring the quality of websites and to examine how these dimensions influence evaluations of satisfaction and loyalty for an online environment. In order to reveal the pertinent dimensions of website quality and establish content validity, existing constructs related to e-service quality, customer satisfaction and satisfaction were reviewed from the literature on Information Systems and Marketing. The conceptual framework for the online customer loyalty model was drawn primarily from the relevant research in the literature on services.

3 OBJECTIVES The main objective of this paper is to study the well-defined constructs in the west, i.e. ease of use, usefulness, enjoyment and satisfaction within an Internet context that emphasizes on e-service quality, satisfaction and leads to customer loyalty. Specifically, there are three research objectives in this paper: Investigates the relationships among ease of use, usefulness and enjoyment and act as the dimensions of e-service quality; Examines how e-service quality and satisfaction contribute to loyalty; Generates recommendations to those researchers and practitioners to improve the practicality, functionality and fun features of website in order to attract customer revisiting the portal again. LITERATURE REVIEW Loyalty Customer loyalty has been recognized by a large number of authors as one of the key topics in Internet that deserves a great deal of attention. According to Griffin (1996, p.50), one of the most exciting and successful uses of this revolutionary technology may be the Internet s role in building customer loyalty and maximizing sales to your existing customers. One of the reasons for the importance of loyalty in the online context according to Rayport and Sviokla (1994) is the changing role of the content, the context, and the infrastructure in the marketplace. A large number of non-academic writings (Hart, 1999; Lidsky, 1999; Poleretzky, 1999) and a few academic articles (Deighton, 1996; Blattberg and Deighton, 1996) discuss the issue of customer loyalty over the Internet. Some researchers (e.g., Day, 1969; Jacoby and Chestnut, 1978) have suggested that a behavioural definition is insufficient because it does not distinguish between true loyalty and spurious loyalty that may result, for example, from a lack of available alternatives for the consumer and from a focus on public-related websites like portals and search engines. Engel and Blackwell (1982) defined brand loyalty as the preferential, attitudinal and behavioural response toward one or more brands in a product category expressed over a period of time by a consumer. Jacoby (1971) expressed the view that loyalty is a biased behavioural usage process that results from a psychological process. According to Assael (1992), brand loyalty is a favourable attitude toward a brand, resulting in consistent usage of the brand over time. This rationale was also supported by Keller (1993), who suggested that loyalty is present when favourable attitudes for a brand are manifested in repeat behaviour. Loyal customers are undoubtedly important because they contribute to the profitability of the service providers (Anderson and Mittal, 2000; Anderson and

4 Sullivan, 1993). They visit a website more frequently than a newly acquired customer and can be served at a reduced operating cost. They provide free word-of-mouth advertising and are likely to pay regular prices. In a recent update on e-loyalty, Reichheld and Schefter (2000, p.107) observed that contrary to current beliefs price does not rule the Web; trust does. According to the authors, referrals are extremely important in e-services and may count for half of the acquired customers for some services. Furthermore, referred customers were found to ask for advice and guidance from the loyal customers who recommended the service to them, thus reducing the company s costs for providing help. Satisfaction According to Oliver (1999), satisfaction is defined as pleasurable fulfilment. A consumer senses that consumption fulfils some need, desire, goal, or so forth, and that this fulfilment is pleasurable. It is the consumer s sense that consumption provides outcomes against a standard of pleasure versus displeasure. It is a state of experience that might vary in intensity but not in quality (Stauss and Neuhaus, 1997). The services offered in a portal were found to include news, , chat rooms, search engine, and so forth, and customer perceptions of the quality of the above services quality have been theoretically represented as consisting of two dimensions. Berry and Parasuraman (1991) distinguished between a process and an outcome dimension, whereas Gronroos (1990) made a distinction between functional and technical quality. The process or functional quality refers to how the service is delivered, while the outcome or technical quality refers to what customers receive and the benefits of using the service (Riel et al., 2000). Gronroos et al. (2000) proposed that for services offered on the Internet the traditional concept of service, consisting of the core service and of facilitating and supporting services, needs to be extended with a fourth factor, the user interface. As noted by Gronroos et al. (2000), it is often difficult to differentiate betw een facilitating and supporting services. Dealing with the dissatisfied customers needs to be in caution, because loyalty cannot be ensured even the high degree of satisfaction is obtained. As mentioned by Stauss and Neuhasus (1997), the ability to keep customers is related to the intensity of customer satisfaction. Perceived e -Service Quality An increasing amount of attention is being paid to the customer-service facet of e-commerce and Internet-based interactions (Urban et al., 2000; Zeithaml et al., 2000). These articles are based largely on the following types of evidence: (a) antecedents about the experiences of individual customers (usually the writer s) with particular

5 websites, (b) information generated through the electronic monitoring of website s (e.g., the ratio of the number of individuals buying from a website relative to those visiting it), and (c) commercial surveys of customer satisfaction with websites (e.g., BizRate.com surveys). In contrast, the scholarly literature is, to our knowledge, devoid of articles dealing directly with how customers access service quality (SQ) and what the antecedents and consequences of Internet SQ are. However, a rich body of knowledge on traditional service quality exists, as does an emerging literature on customer interactions with new technologies. We provide a brief overview of key insights from these two research streams that serve as useful background information for discussing customer assessments of service quality in an online context. Using a porta l site can be described as a complex process that can be divided into sub-processes such as retrieving or exchanging information via search engines or it's the site s existing database. Allard et al. (2000) described a case in which customers were satisfie d with the responsiveness and user-friendliness of a search engine but dissatisfied with the reliability of the search outcome. The authors assumed that the un/successful process or outcome of an interaction influences a customer s overall satisfaction wit h a website. Dimensions of e-service Quality Past research has investigated a wide variety of factors influencing the adoption and use of computers, such as demographic characteristics (Brancheau and Wetherbe, 1990; Thong, 1999), perceived ease of use, perceived usefulness (Davis et al., 1989), and perceived enjoyment or fun (Igbaria et al., 1994). In contrast, research in the context of factors influencing satisfaction and e-loyalty has been relatively limited. a) Ease of use Ease of use refers to the process leading to the final outcome. It is defined as the degree to which a person believes that using a particular system would be free of effort (Davies, 1989, p.320). When conducting activities in a portal, ease of use can be thought of as the proces s of using the new media while engaging in online behaviour. Ease of Use is the extent to which one s interaction with a website would be free of effort (Moon and Kim, 2001). Ease of understanding, ease of finding, and information focus characterize Ease of Use. It is a fundamental and distinct construct that has been found to impact decisions to utilize information technology (Davis et al., 1989: Hill et al., 1987; Swanson, 1982, 1987). Perceived ease of use as a construct in this study is defined as the perception of how easy and free from difficulty conducting activities from the portal is for the consumer.

6 Simplicity in accomplishing the necessary tasks will intensify feelings of control and usefulness. Perceived behavioural control has been defined by Ajzen (1998, p.132) as the perceived ease or difficulty for performing the behaviour. The easier technology is to use, the more it can encourage feelings of control and usefulness in the consumer. Swanson (1987), in his study to test a model for explaining choice and use of information, found that the ability to control the selection and use of information related favourably to the perceived ease of use factor. b) Usefulness The usefulness of the technology refers to the degree to which using the system or technology will improve the user s performance in the workplace. Davies (1989, p.320) defines perceived usefulness as the degree to which a person believes that using a particular system would enhance his or her job performance, as the user s subjective perception that using a specific computer application will increase his or her job performance within the organizational context (Davis et al., 1989). A website is useful if it can deliver services to the consumer. A customer s experience with a supplier is recognized as a significant basis for differentiating between suppliers (Barnes and Vidgen, 2000a). If there is no difference between brands and services, the part of the experience that deals with the delivery of the services then becomes a measure of the usefulness of the website. The website would not be useful if delivery expectations were not met. A customer s perception of how useful and accurate the content, information and the linkages (usefulness) of a website are, will have an impact on his/her attitude towards the site. Consumers like a website within which they can easily navigate to accomplish their search using the web search engine, that allows them to obtain useful and accurate information to improve their decision-making process, and one in which they received some value. If they like the web search engine, trust should develop, leading to the formation of a favourable impression and future usage. Usefulness is considered to be necessary for acceptance of conducting Internet activities. Burke (1997) deemed usefulness to be the major prerequisite for mass-market acceptance and appeal. He predicted that the ability of consumers to have easy and extensive access to useful information and to interact with three-dimensional products will further increase usage and satisfaction. Peterson (1997) also stressed the importance of consumer acceptance for the success of Internet services and stated that this acceptance is dependent on consumer expectations of how this technology will improve and simplify their lifestyle. Others have also expounded on the idea that customer acceptance of the technology is an important factor in the success of Internet activities (Aragon, 1997; Dabholkar, 1996). Perry s 1995 survey

7 found that Internet users were interested in obtaining textual information, statistics, graphics, and audio features. He indicated that, to be useful, the content of a website should be understandable and fresh. It is the ultimate means of communicating with users. c) Enjoyment Enjoyment may be defined as the extent to which the activity of using the computer is perceived to be enjoyable in its own right, apart from any performance consequences that may be anticipated (Carroll and Thomas, 1988; Deci, 1971; Malone, 1981). Hence, individuals who experience immediate pleasure and joy from using the computer per se will be more likely to use it more extensively than others. Webster and Martocchio (1992, p.204) defined microcomputer playfulness as the degree of cognitive spontaneity in microcomputer interactions. They suggested that a significant amount of traditional research on human computer interactions deals with the negative aspects of computers (i.e., rejection of systems and adverse psychological reactions) while leaving the positive factors untouched until recently. Recent research (Gardner, Young, and Ruth, 1989; Howard and Smith, 1986) suggests that there has been a shift in attention from the fearful aspects of computers to the positive aspects. The use of a portal may also be motiv ated by intrinsic psychological rewards. Perceived enjoyment and fun represent an intrinsic motivation for using it. Enjoyment represents a type of intellectual playfulness and is defined as an individual s tendency to interact spontaneously, inventively, and imaginatively with the computer. Empirical research indicates that the general characteristics of enjoyment/fun relate positively to creativity and to an exploratory type of behaviour during interaction with computers (Webster, 1992). Studies have shown that individuals who experience pleasure and joy from using the computer and perceive any activity involving use of microcomputers as inherently enjoyable, apart from any anticipated improvement in performance, are likely to use it more extensively than others (Davis, 1992; Malone, 1981; Webster, 1989). Davis et al. (1989) found that while perceived usefulness emerged as the major determinant of using a portal in the Internet, enjoyment and fun had a significant effect beyond perceived usefulness.

8 Concepts References Relevance Study Strong attitudes positively affect customer loyalty Baldinger and Rubinson (1996) Strong attitudes affect behaviours when they are influenced by the service quality of the product. Antecedents of behavioural intentions on the Internet Liu and Arnett (2000) Antecedents are the quality of information, service, system use, playfulness, and website design Dimensions of measuring the quality of a website Lociacono et al. (2000) Strong attitudes affect behaviours when they are influenced by the service quality of the product. Factors that induce loyalty in customers Wolfinbarger and Gilly (2002) The factors are website design, reliability, privacy/security, and customer service. Ease of use and usefulness predict behavioural intentions Davies (1986); Davies (1989) Technology Acceptance Model predicts intentions to use a website. Usefulness is a multi-dimensional construct Davies (1989); Venkatesh and Davies (1996) Understanding the antecedents to usefulness (servic e quality) may improve loyalty to the site. The web interface strongly influences the motivation to use the Internet and return to a site. Chau et al. (2002) Web interface is positively related to perceived usefulness, ease of use, and enjoyment. Ways to be a successful website Zeithaml, Parasuraman and Malhotra (2002) Five factors that attract customers to return to a website: availability of information and content, ease of use or usability, privacy or security, graphic style and fulfilment. Table 1 Summary of the Marketing Literature on Web Elements for Loyalty

9 THE INTEGRATED ONLINE CUSTOMER LOYALTY MODEL Three major constructs with many dimensions are considered as determinants of a model on online customer loyalty. A conceptual framework is presented in figure one below. Dimensions Higher-level Abstractions Behaviors Ease of Understanding Operational Ease of Use H1+ Information Quality H2+ Perceived e-sq H4+ Satisfaction Secure & Privacy Usefulness H5+ Customer Service Web Design Enjoyment H3+ Loyalty Entertainment Figure 1: Conceptual Model of Online Customer Loyalty As shown in Figure 1, Perceived enjoyment, perceived usefulness and perceived ease of use have been discussed and identified as the variables influencing the behavioural intention to use the technology, and these are the constructs for the antecedents of the model as well. In addition, peer influence and past experience are also antecedents. When an online user a visits a particular portal for the first time because of its reputation from word-of-mouth recommendations and advertisements, and so forth, or even he/she has already tried out the portal and been satisfied, he or she will be motivated to use this portal again.

10 Based on the literature reviews, the following hypotheses are set: Number Direction Path Hypothesizes H1 Positive Ease of Use Perceived Service Quality H2 Positive Usefulness Perceived Service Quality H3 Positive Enjoyment Perceived Service Quality H4 Positive Perceived Service Quality Satisfaction Ease of use is positively related to overall satisfaction with the perceived service quality of a website. Usefulness is positively related to overall satisfaction with the perceived service quality of a website. Enjoyment is positively related to overall satisfaction of the perceived service quality of a website. Once service quality is enhanced by web elements, customers will be more satisfied. H5 Positive Satisfaction e-loyalty Consumer satisfaction is positively related to the intention to return to the portal. RESEARCH METHODOLOGY This paper is a preliminary study in integrating the existing literatures related to online customer loyalty. A survey instrument based on constructive comments from the pre-test will be used to conduct a pilot study.. Sudman (1983) and Perry (1994) have provided the guidance that the typical sample size for analyzing few or segments is in the range of and the samples will be collected in the Hong Kong Chek Lak Kok airport. Preliminary questionnaire for pilot test will be prepared. The reasons to conduct pilot test as to detect any problems in the research design and instrumentation, to delete any irrelevant items in the questionnaire for the study and also, to test the applicability of the measurement scales. The aim is to ensure that the items in the main survey are used for each constructs are understandable to the respondents in order to obtain a high level of content validity (Churchill, 1979). A small number of samples will be asked to identify the questions or items that are not clear to them and provide advice on modifying those items. The main survey will be performed after the pilot test. Tull and Hawkins (1993) listed four important criteria in desig ning a survey speed, information, collection, costs and non-response rate. With the careful design of the questionnaires, information can be collected. CONCLUSION The acquisition of e-customers is not easy and expensive. Customers can quite easily evaluate and compare the benefits of competing services and switching costs are low. As a result, the major focus of this research is about the ways in establishing long-term relationship with online users. Research is needed with respect

11 to the influence of technology on all customer responses, such as satisfaction and loyalty. Different ethnic origins may have some differences in the perceptions of e-service quality and leads to loyal over the Internet. Comparative study can be conducted in finding out the similarities and differences of different groups so that provides better insights to the firms to target their customers in a proper way. Future research is recommended to extend the use of the model in the comparison between Chinese and Western online customer s characteristics by undertaking empirical examination and research. REFERENCES Ajzen, Icek. Attitudes, Personality, and Behavior, Chicago: Dorsey Press Allard, C.R. van Riel, Veronica L. and Petra J., Exploring consumer evaluations of e-services: a portal site, International Journal of Service Industry Management,2001, 12(4), Anderson, E.W. and Mittal.V. Strengthening the satisfaction-profit chain, Journal of Service Research, 2000,3(2), and Sullivan.M.W. The antecedents and consequences of customer satisfaction for firms, Marketing Science, 1993, 12(2), Assael, Henry. Consumer behavior and marketing action. Boston, MA: PWS-KENT Publishing Company Aragon, Lawrence. Banking on IT, PC Week, 14, June, 1997, Baldinger, Allan L. and Rubinson Joel (1996), Brand Loyalty: The Link between attitude and behavior, Journal of Advertising Research, 1996, 36(6), Barnes, S.J. and Vidgen, Richard. Information and interaction quality: Evaluating Internet Bookshop Web sites with SERVQUAL, Proceedings of the Proceedings of the 13 th International E -Commerce Conference, BLED, Berry, Leonard L. and Parasuraman.A. Marketing Services: Competing Through Quality, Journal of Marketing, 1992, 56(2); Blattbery, Robert C. and Deighton.J. Managing Marketing by the Customer Equity

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14 Sons, Chichester. New York: Wiley Keller, Kevin Lane. Conceptualizing, measuring, & managing customer-based brand equity, Journal of Marketing, 1993, 57 (January), Lidsky, David. Getting Better all the Time: Electronic Commerce Sites, PC Magazine, 1999,October, 98. Liu, Chang and Kirk P. Arnett. Exploring the Factors Associated with Web Site Success in the Context of Electronic Commerce, Information and Management, 2000, 38, 1, Lociacono, Eleaneor, Richard T. Watson, and Dale Goodhue, WebQual: A Web site Quality Measurment, Working paper, Worcester Polytechnic Institute Malone, T.W. Toward a theory of intrinsically motivating instructions, Cognitive Science, 1981, 4, Meuter, M.L., Ostrom, A.L., Roundtree, R.I., and Bitner, M.J. Self-service technologies: understanding customer satisfaction with technology-based service encounters, Journal of Marketing, 2000,64, July, Moon, Ji-Won and Kim. Young-Gul, Extending the TAM for a World-Wide Web context, Information & Management, 2001,38, Oliver, Richard L. Whence Customer Loyalty, Journal of Marketing, 1999, 63, Perry, C. A Structured Approach to presenting PhD Thesis: Notes for Candidates and their Supervisors, Paper presented to the ANZ Doctoral Consortium, University of Sydney, April Philips, Fred, Dononho Andrew, Keep, W.W. Mayberry, W., McCan, H.M., Shapiro, K., and Smith, D. Electronically Connecting Retailers and Customers: Interim Summary of an Expert Roundtable, in Electronic Marketing and the Consumer, Reobert A. Peterson, editor, Thousand Oaks, California: SAGE Publications, Inc., 1997,pp Poleretzky, Zoltan. The Call Center & E-commerce Convergence, Call Center

15 Solutions,1999, 7(17), (January), 76. Rayport, J.F. and Sviokla, J.J. Exploiting the virtual value chain, Harvard Business Review, 1995, 73(6), Reichheld, F.F. and Schefter, P. E-loyalty: your secret weapon on the Web, Harvard Business Review, 2000,July-August, Riel, Allard C.R., Liljander V. and Jurriens, P. Exploring consumer evaluations of e-services: a portal site, International Journal of Service Industry Management, 2001, 12(4), Stauss Bernd and Neuhaus. Patricia. The qualitative satisfaction model, International Journal of Service Industry Management, Bradford; 1997, 8(3),236. Swanson, E.B. Measuring User Attitude in MIS Research: A Review, OMEGA, 1982, 10(2), Information Channel Disposition and Use, Decision Sciences, 1987,18(1), Thong, J.Y.L. An integrated model of information systems adoption in small business, Journal of Management Information Systems, 1999, 14(4), Tull, D.S. and Hawkins, D.I. Marketing Research: Measurement and Method, 3 rd Edition, Macmillan Publishing Co.Inc., New York Urban, G.L. Sultan, F. and Qualls, W.J. Placing trust at the center of your internet strategy, Sloan Management Review, 2000, 42(1), Venkatesh, Viswanath and Davis. Fred D. A model of the antecedents of perceived ease of use: Development and test, Decision Sciences, 1996, 27(3), Webster, E.J. Playfulness and Computers at work, doctoral thesis, Stern School of Business Administration, New York University, New York. NY Webster, E.J. and Martocchio, J.J. Microcomputer playfulness: development of a measure with workplace implications, MIS Quarterly, 1992, 6,

16 Wolfinbarger, Mary F. and Mary C. Gilly, Shopping Online for Freedom, Control and Fun, California Management Review, 2001, 43, 2, Zeithaml, Valarie A., Parasuraman, A. and Malhotra, A., A conceptual framework for understanding e-service quality: implications for future research and managerial practice, Working paper, Marketing Science Institute, Report Number

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