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The Relationship Between Price and Loyalty in Services Industry ISSN 1392 – 2785 Inzinerine Ekonomika-Engineering Economics(3). 2009 COMMERCE OF ENGINEERING DECISIONS The Relationship between Price and Loyalty in Services Industry Regina Virvilaite, Violeta Saladiene, Dalius Skindaras Kaunas University of Technology Laisves av, 55, LT-44309 Kaunas, [email protected] [email protected] The article consists of four parts, where the first part 2. To specify price acceptance, price fairness and formulates the problem, aim and objectives of the article. measuring model of its determinants and to check The aim of the article is to specify the relationship between empirically its psychometric characteristics. price and loyalty based on existing theory and after that to The implementation of formulated aim and tasks is test it empirically in the sanatorium “Versmė”. related with hypotheses of this research. The aim is achieved with the help of the objectives The research is being performed at the AB Birštonas formulated that seek:1) to ground importance and sanatorium “Versmė“. 112 respondents participate in the problematic of relationship between price and customers’ research. The results of linear multiple regression analysis loyalty research, 2) to define concept price-loyalty relationship, are presented and the causality between loyalty and price 3) to reveal customers’ loyalty conceptual importance and is described. factors conditioning it, 4) to prepare a theoretical model of The last part of the article delivers conclusions and relationship between service price and customers’ loyalty, suggestions of the analysis and research. 5) to perform empiric research of relationship between Keywords: relationship, customers’ loyalty, price, service service price and customers’ loyalty, based on generalized industry. methodological attitudes on case of AB Birštonas sanatorium “Versmė“. Here the relevance of the topic is analyzed and the Introduction main gaps in the literature related to the price-loyalty It is important for service enterprises to work out relationship are revealed. This part presents definition of marketing strategy acting in market with high competition problem and necessity of further research is justified. To in order to assure long - term competitive advantage. reach the aim a comparison analysis of scientific literature Marketing concept raises condition stating that service and systemic methods is used. enterprises, striving to obtain long-term competitive In the second part the analysis of price-loyalty advantage, must identify and satisfy customer’s demands relationship nature is presented and the concept of loyalty better than the competitors. On the ground of marketing is defined and classification of consumers based on loyalty theoreticians, a price is the most important factor, is analyzed. In this part factors conditioning customers determining customers’ satisfaction. Customers estimating satisfaction are being analyzed, discussed and presented the value of obtained service most often think about the by various scientists. After performing theoretical studies price. Studying price relationship with customers’ satisfaction of relationship between price and customer, a theoretical and loyalty, marketing theoreticians, state that satisfaction integrated model of price, satisfaction and loyalty based on depends on service quality, price and other factors. Consuegra, Molina and Esteban (2007) has been Striving to act successfully in internal and global market, prepared. Based on confidence, social and exclusive service enterprises should evaluate price impact on viewpoint rewards satisfaction is being measured though customers’ satisfaction and loyalty. rewards of relationship. The results of this measurement Huber et.al. (2001), Henning-Thurau et al. (2002), are presented in the next part of the article. Wong and Zhou (2006), Avlonitis and Indounas (2006), In the third part the research methodology, is described Consuegra, Molina and Esteban (2007) and Banyte, and the results of data analysis are provided. The research Salickaite, (2008), Tamosiuniene and Jasilioniene (2007) object, problem, aim and objectives are defined in this and other scientists’ performed empiric research confirm part. For empiric research we applied quantitative (a that service price as one of customers’ loyalty factors, questionnaire survey) research method. The object of the becomes an important object of marketing research. research is relationship between service price and customers Marketing theoreticians stress that there are quite a loyalty. few theoretic and empiric researches where the relationship The aim of the research is to identify causality consistent between the price and customer loyalty were being patterns between loyalty and its determinants and service analyzed. It confirms the problem of the analyzed object. price. The identified problematic situation gives possibility to The research tasks are as follows: formulate scientific problem in a question: does relationship 1. To specify and check empirically theoretic model of exist between service price and customers loyalty? relationship between service price and customers loyalty The aim of the article - is to justify in theory and when identifying factors of loyalty and price acceptance. empirically check service price and customers loyalty - 96 - relationship in the case of AB Birštonas sanatorium them with other but the same taking into account “Versmė”. circumstances as well (Beldona and Manasivayam, 2006). The aim is achieved with the help of the objectives Consuegra, Molina and Esteban (2007) based on formulated that seek: Bolton et al., (2003) state that concept “price fairness” is 1) to ground importance and problematic of relationship described as a decision hereof if an expected result and/or between price and customers’ loyalty research, process, necessary to achieve the aim, is reasoned, acceptable 2) to define concept price-loyalty relationship, or fair. A cognitive aspect of this definition indicates that 3) to reveal customers’ loyalty conceptual importance price fairness is decided comparing service price with and factors conditioning it, appropriate standard. 4) to prepare a theoretical model of the relationship Consuegra, Molina and Esteban (2007), Dovaliene and between service price and customers’ loyalty, Virvilaite (2008) state that service price increase is more 5) to perform empiric research of the relationship acceptable for customers if a service gives bigger satisfaction. between service price and customers’ loyalty, based on Performed scientific research confirms that positive generalized methodological attitudes to the case of AB relationship exists between changes of customer’s Birštonas sanatorium “Versmė“. satisfaction and service price increase acceptability. Research methodology used in the article – is the In marketing literature a price is indicated as the most comparison analysis of scientific literature and systemic important factor, conditioning customers’ satisfaction, methods. For empiric research of relationship between because, if customers estimate the value of obtained service price and customer loyalty we applied quantitative service, they usually think of price (Zeinhaml, 1988; (a questionnaire survey) research method. Linear multiple Fornell, 1992; Anderson and Sullivan, 1993; Anderson et regression analysis was used to identify the causality al., 1994; Cronin et at., 2000 and Virvilaite 2008). Studying between loyalty and price. price relationship with satisfaction scientists indicated that the level of satisfaction, depends on service quality, price Concept of the price-loyalty relationship and personal factors. As Consuegra, Molina and Esteban (2007) state, earlier empiric research has not examined Dovaliene and Virvilaite (2008), state that price is one price factor influence on consumers’ satisfaction. Based on of the most flexible marketing mix elements that can be this, Consuegra, Molina and Esteban (2007) formed an quickly changed, after changing specific product and integrated model of price, satisfaction and loyalty. service characteristics. Besides, decisions for price are Consuegra, Molina and Esteban (2007) based on Jamal most effective when harmonized with other marketing mix (2004) and Pranulis (2008), Banyte (2008) state that during elements – product or service, place and promotion. the last four decades majority of marketing scientists treat According to Nagle and Holden (2002) and Ginevicius customers satisfaction as one of the most important objects (2008), product and service creation, its sale and for theoretic and empiric research. Following the opinion promotion are the successful beginning of business, and of scientists, a concept “satisfaction” expresses customer’s optimal price determination assures income. Likewise focused aim. Homburg et. al. (2006) state that both many scientists indicate and Ostaseviciute and Sliburyte acknowledgement and emotional state explain decisions (2008) confirm that service price is the only marketing mix related with satisfaction. Performed empiric research element bringing income to an enterprise. confirmed that emotions experienced during the service Consuegra, Molina and Esteban (2007) state that may have big influence on satisfaction. Following the striving to determine relationship between service price opinion of Henning-Thurnau et.al (2002), Gwinner and and customer loyalty first of all it is necessary to discuss Gremler (2002), Burns and Neisner (2006), conceivable such concepts as price fairness and
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