View metadata, citation and similar papers at core.ac.uk brought to you by CORE T he research reg ister for th is journ al is available at T h e cu rren t issue and fu ll tex t arch ive of this jou rn al is aprovidedv ailab le byat OAR@UM http://www.emeraldinsight.com/researchregisters http://www.emeraldinsight.com/0309-0566.htm Service Service loyalty loyalty The effectsof service quality and the mediatingrole of customer satisfaction AlbertCaruana 811 Centre forCommunication Technology,University of Malta, ReceivedOctober 1999 Msida,Malta RevisedMay 2000; October2000 Keywords Loyalty,Service quality, Customer satisfaction, Banking Abstract Serviceloyalty, with its final effect on repurchasing bycustomers, appears tohave receivedrelatively little attention.This study starts by first delineating theconcept ofservice loyaltyand proceeds to distinguish between service quality and customer satisfaction. A mediationalmodel that links servicequality to service loyalty via customer satisfaction is proposed.Appropriate measuresare identifiedand a postalsurvey is undertaken among1,000 retail banking customers.A response rate of20.5 per cent isobtained. Results indicate that customersatisfaction does play amediatingrole in theeffect ofservice quality on serviceloyalty. Theeffects of a number ofdemographic indicators on serviceloyalty are alsoreported. Implicationsare discussed,limitations of the study are notedand possible areas for further research are indicated. Introduction Service loyalty,with its final effect onrepurchasing by customers, is perhaps oneof the most importantconstructs in services marketing.Indeed, loyal customers thatindulge in repeat purchases are the bedrock of any business. Oneofthemore obvious questions relates tothe demographic characteristics of loyal customers,whether any such variables are more salient thanothers and howthese canbe usedfor segmentation purposes (e.g. Frank, 1967). However, workthat integrates the role ofservice loyaltywithin thecontext of other service marketingvariables like service qualityand customer satisfaction has received less attention. Service qualityhas been the subject ofconsiderable interest byboth practitionersand researchers inrecent years,spurred on bythe original work byParasuraman et al. (1985). Animportant reason for the interest inservice qualityby practitionersresults fromthe belief thatthis hasa beneficial effect onbottom-line performancefor the firm. However, practitioners often tend to use theterms service qualityand customer satisfaction interchangeably. Amongacademics thesatisfaction constructis recognisedas beingdistinct and hasdeveloped along fairly independent lines fromservice quality(e.g. Oliver, 1980).The concepts ofservice quality,customer satisfaction andservice loyaltyare related toeach other.Theoretically, the expectancy/ disconfirmation paradigmin process theorycan provide the grounding for this study,with service qualityas anantecedent construct and service loyaltyas anoutcome EuropeanJournal of Marketing, variableof customer satisfaction. Abetterunderstanding of the effects of Vol.36 No. 7/ 8,2002, pp. 811-828. # MCB UPLimited,0309-0566 service qualityand customer satisfaction onservice loyaltycan help academics DOI10.1108/ 03090560210430818 European inthe development of a model ofservice marketing.It can also provide Journal of practitionerswith indications as towhere best todevote marketing attention Marketing andscarce corporateresources. Thisstudy seeks tocontribute to the development of a conceptual 36,7/8 frameworkthat integrates service loyalty,service qualityand customer satisfaction. Itreviews theliterature on these threeconstructs and outlines the 812 expectedrelationships ina researchmodel. Appropriate measures are identified andresearch is carriedout among retail bankingcustomers totest thehypothesised relationships. The demographic characteristics ofloyal customers arealso investigated.Implications fortheory development and managementare discussed. Service loyalty Theconceptualisation oftheloyalty construct has evolved over the years. In theearly days the focus ofloyaltywas brandloyalty with respect totangible goods(Cunningham, 1956; Day, 1969; Kostecki, 1994; Tucker, 1964). Cunningham(1956) definedbrand loyalty simply as ``theproportion of purchasesof a householddevoted to the brand it purchasedmost often’’. Cunningham(1961) was tobroaden the spectrum of analysis byfocusing on store as opposedto brand loyalty using the same measures hehadused earlier forbrands. Over time thefoci havecontinued to expand,reflecting thewider perspective ofmarketing to include othertypes of loyalty such as vendor loyalty.However, few studies havelooked at customer loyalty of services (Oliver,1997). The intention of this section is toshow theevolution of the loyaltyconstruct over time, mappingout the construct’s domain and its specific componentsto provide a clear definitionof the service qualityconstruct used in this study. Areview ofthe literature indicates thatmuch of the initial research emphasised thebehavioural dimension of loyalty. This is epitomised by Tucker(1964, p. 32) whoholds that: Noconsideration should be givento whatthe subject thinks nor what goes on in hiscentral nervoussystem, his behaviour is thefull statementof whatbrand loyalty is. Areview byJacoby (1971) confirmsthat prior studies havefocused entirely on behaviouraloutcomes andignored consideration of whatwent onin customers’ minds.Brand loyalty was simplymeasured in terms ofits outcome characteristics (Jacobyand Chestnut, 1978). This involved determining the sequence ofpurchase (Brown, 1952, 1953; Lawrence, 1969;McConnell, 1968; Tucker,1964), proportion of purchasedevoted to a givenbrand (Cunningham, 1956) andprobability of purchase (Frank, 1962; Maffei, 1960). Day(1969) arguedthat ` `thereis moreto brandloyalty than just consistent buyingof the same brand.Attitudes forinstance’ ’.Building on this work, Jacoby(1969, 1971) provideda conceptualisation ofbrand loyalty that incorporatedboth a behaviouraland an attitudinal component. The behaviouralaspect ofloyalty focuses ona measureof proportion of purchase of aspecific brand,while attitudeis measuredby a single scale (Day,1969) or Service muti-scale items (Selin et al.,1988).Day obtained a valuefor loyalty by dividing loyalty theratio of purchase of a brandby themean scores obtainedfor attitude. The behaviouraland attitudinal aspects ofloyalty are reflected inthe conceptual definitionof brand loyalty offered by Jacoby and Chestnut (1978). These authorshold that: 813 Brandloyalty is (1) biased(i.e. nonrandom), (2) behaviouralresponse (i.e. purchase),(3) expressedover time, (4) bysome decision making unit, (5) with respectto oneor more brands outof asetof suchbrands, and is afunctionof psychologicalprocesses. Muchof the work on loyalty in the 1970s andearly 1980s hasused this conceptualisation (cf. Goldberg,1981; Lutz andWinn, 1974; Snyder, 1986). Morerecently, Dick and Basu (1994) suggestan attitudinal theoretical frameworkthat also envisages theloyalty construct as beingcomposed of ``relativeattitude’ ’and` `patronagebehavior’’. Afurtheraspect ofloyalty identified byother researchers inmore recent yearsis cognitiveloyalty. This is seen as ahigherorder dimension and involvesthe consumer’s conscious decision-makingprocess inthe evaluation of alternativebrands before a purchaseis effected. Gremlerand Brown (1996) extendthe concept of loyalty to intangible products, and their definition of service loyaltyincorporates the three specific componentsof loyalty considered,namely: the purchase, attitude and cognition. Service loyaltyis defined as: Thedegree to whicha customerexhibits repeat purchasing behavior from a serviceprovider, possessesa positiveattitudinal dispositiontoward the provider, and considers using only this providerwhen a needfor this serviceexists (Gremler and Brown, 1996). Service quality Definitions ofservice qualityhold that this is theresult ofthe comparison that customers makebetween theirexpectations abouta service andtheir perceptionof theway the service hasbeen performed (Lewis andBooms, 1983; Lehtinenand Lehtinen, 1982; Gro ¨nroos,1984; Parasuraman et al.,1985,1988, 1994).Lehtinen and Lehtinen (1982) givea three-dimensional view ofservice quality.They see it as consisting ofwhat they term ``interaction’ ’,` `physical’’ and` `corporate’’quality.At ahigherlevel, andessentially froma customer’s perspective,they see qualityas beingtwo-dimensional, consisting of``output’’ and` `process’’quality.The model proposedby Gro¨nroos(1984, 1990) highlights therole oftechnical (oroutput) quality and functional (or process) qualityas occurringprior to, and resulting in, outcome quality. In this model technical qualityrefers towhatis deliveredto the customer, be it themeal ina restaurant, thesolution provided by a consultant,or the home identified bythe estate agent.Functional quality is concernedwith howthe end result ofthe process was transferredto the customer. This concerns both psychological and behavioralaspects thatinclude theaccessibility tothe provider, how service employees performtheir task, what they say and how the service is done.Thus European while technical qualitycan often be quite readily evaluated objectively, this is Journal of moredifficult todo with functionalquality. The model also recognises that Marketing customers also havesome typeof image ofthe firm, which hasa qualityimpact initself andfunctions as afilter. Thecustomers’ perceived quality is theresult 36,7/8 oftheevaluation they make of what was expectedand