2010:007
M A S T E R ' S T H E S I S
Influential Factors of Customer E-loyalty In Iranian e-stores
Javad Eskandarikhoee
Luleå University of Technology Master Thesis, Continuation Courses
MASTER’S THESIS
Influential Factors of Customer E-loyalty In Iranian e-stores
Supervisors:
Dr. Peter Naude (LTU)
Dr. Mohammad Aghdasi (TMU)
Prepared by:
Javad Eskandari khoee
Tarbiat Modares University Faculty of Engineering Department of Industrial Engineering
Lulea University of Technology
Division of Industrial Marketing and E-Commerce
Joint MSc PROGRAM IN MARKETING AND ELECTRONIC COMMERCE
2009
In the name of God Abstract
The rapid development of technology and internet has diverted company direction to retain customer e-loyalty. Customer loyalty is becoming an area of great interest for companies and customer loyalty has a direct impact on the revenue and profitability of a company. With regard to customer loyalty‟s importance, we investigate three main research problems that are the most important barriers for e-businesses to survival, which are customer too much switching, switching cost, and competition. To overcome this barriers; companies had to invest on building loyal customer in long-time relationship. Also, in this research, the influential factors of customer e-loyalty were investigated, which are e-satisfaction, e-trust, and e-quality.
In this research, e-loyalty and e-satisfaction models are elaborated, then, with regard to limitations, the conceptual e-loyalty model are assumed that investigate the relationship between the e-satisfaction, e-trust, and e-quality as basic constructs of model as well as the relationship between each constructs and e-loyalty.
In this study, quantitative research is best to this thesis because of linear structure between e- loyalty and its constructs. In addition, research purpose and research questions indicate that this thesis is primarily exploratory then descriptive. Since the aim of this research is to investigate the relationship of variables and to test some predefined hypothesizes among a number of e-stores, survey is selected as research strategy.
The aim of this research is to identify influential factors of customer e-loyalty in Iranian e-stores which are focus on selling Book and CDs. Thus, the sample of this survey consists of online buyers who have deals with three e-stores. The names of e-stores were considered anonymous due to owner's request since they feel free to give us customer's information. Moreover, the size of the population under this study is the sample size that has been determined 280 under formula;
still, 352 questionnaires were gathered out which 322 were eventually accepted.
The result of this research shows that delivery time, distribution system, specific invoice as well as convenience and flexibility of online shopping is very underlying factor of e-satisfaction from customer point of view.
In addition, giving Personal Data, Reliable information, Credit card information, and having Physical location have a very influential effect on E-trust from customer point of view. Also, e- stores brand name as well as previous user‟s recommendations is the most underling factors which bring about good word of mouth and finally lead to trust in online shopping. Moreover, Experience of members in communities and chartrooms leads to developing E-trust among members.
Besides, need fulfillment, advertisement / promotions, and customized attention are the influential factors of E-quality from customer perspective. Also, sending reminder, relevant information, and share of business with customer are the most underlying factors which affect cultivation and increase customer attention in online shopping and consequently increase e- quality. Moreover, one-stop shop and carry a wide selection of products are the most prominent issues which lead to e-quality.
In conclusion, all factors which increase E-satisfaction and E-quality lead to e-loyalty so E- satisfaction as well as E-quality considered as two influential factors of customer E-loyalty.
Also, since significant relationship between E-trust with E-loyalty and E-satisfaction rejected, we can say that preparing e-trust solely has no effect on E-loyalty and E-satisfaction. In other words, trust is sufficient condition for any e-business for transactions with customer which is not lead to e-loyalty, exclusively. Beside, since there is significant and positive relationship between E-trust and E-quality, and because E-quality has direct effect on E-satisfaction and E-loyalty, we can conclude that E-trust in companion with E-quality will lead to E-satisfaction and E-loyalty.
Keywords: E-loyalty, E-satisfaction, E-trust, E-quality
Acknowledgment:
I carry many efforts to doing this research and I learn many different things during thesis. I thank all people who help me to accomplish this research.
I would like to express my gratitude to my supervisors both Dr. Pete Naude and Dr. Mohammad aghdasi. They help me a lot during different phases of thesis and show me research direction.
Also, I really thank from my colleagues and friends who guide me appropriately.
Finally, I would like to express my greatest appreciation to my mother who always support me in all aspect of life and encourage me to progress, continuously.
Table of Contents
Chapter 1: Introduction and preliminary ... 12
1.1. Introduction ... 13
1.2. Research Importance from seller’s Perspective ... 14
1.3. Research Problem ... 14
1.3.1. Too much switching ... 15
1.3.2. Switching cost ... 15
1.3.3. Competition ... 16
1.4. Research Goals and Objectives... 16
1.5. Key Word Definition... 17
Chapter 2- Literature review ... 18
2.1. Introduction ... 19
2.2. Customer loyalty history ... 19
2.3. Benefits of Customer Loyalty ... 20
2.3.1. Acquisition Cost ... 21
2.3.2. Referrals... 21
2.3.3. Price Premium ... 22
2.3.4. Operating Cost ... 22
2.3.5. Revenue Growth... 23
2.4.Customer E-loyalty definition ... 23
2.5. Influencing Customer E-loyalty Factors ... 23
2.5.1. E-satisfaction ... 24
2.5.2. E-trust ... 27
2.5.3. E-quality... 30
2.6. E-loyalty and E-satisfaction Models ... 31
2.6.1. Model of Szymanski ... 31
2.6.2. Model of Srinivasan ... 32
2.6.3. Model of Gummerus ... 34
2.6.4. Model of Anderson ... 37
2.6.6. Model of Semeijn... 39
2.6.7. Model of Rodgers ... 41
2.6.8. Table of Models Comparison ... 42
2.7. Conceptual E-Loyalty Framework ... 43
2.8. Research questions ... 45
Chapter three- Research Methodology ... 48
3.1. Research approach... 49
3.2. Research purpose ... 49
3.3. Research Strategy ... 51
3.4. Population and Sample selection ... 51
3.5. Data Collection Method ... 52
3.6. Measurement of constructs ... 53
3.7. Pilot test... 54
3.8. Reliability ... 55
3.9. Validity ... 55
3.10. Statistical Method ... 56
Chapter 4: Data Analysis ... 58
4.1. Descriptive statistics... 59
4.2. Measurement Reliability ... 60
4.3. Factor Validity ... 61
4.3.1. Results of exploratory factor analysis ... 61
4.4. Freidman Analysis of Variance Test ... 63
4.4. E-satisfaction Evaluation... 66
4.4.1. Reliability Measurement of E-satisfaction... 66
4.4.2. One sample T-test for E-satisfaction ... 66
4.4.3. Regression & Confirmatory Factor Analysis for E-satisfaction... 68
4.4.3. 1. CFA under non-standardized estimation ... 68
4.4.3.2. CFA under standardized estimation ... 69
4.4.3.3. E-satisfaction Model Fitness ... 71
4.5. E-trust Evaluation ... 72
4.5.1. Reliability Measurement of E-trust ... 72
4.5.2. One sample T-test for E-trust ... 72
4.5.3. Regression & Confirmatory Factor Analysis for E-trust ... 74
4.5.3. 1. CFA under non-standardized estimation for E-trust ... 74
4.5.3.2. CFA under standardized estimation for E-trust ... 75
4.5.3.3 E-trust Model Fitness ... 78
4.6. E-quality Evaluation ... 79
4.6.1. Reliability Measurement of E-quality ... 79
4.6.2. One sample T-test for E-quality ... 79
4.6.3. Regression & Confirmatory Factor Analysis for E-quality ... 81
4.6.3. 1. CFA under non-standardized estimation for E-quality ... 81
4.6.3.2. CFA under standardized estimation for E-quality ... 82
4.7. E-loyalty Evaluation ... 85
4.7.1. Reliability Measurement of E-loyalty ... 85
4.7.2. One sample T-test for E-loyalty ... 85
4.8. Study Main Hypothesis of Research ... 86
4.8.1. Latent Variables Evaluation ... 86
4.8.2. Structural Equation Modeling for E-loyalty ... 88
4.8.2.1. SEM under non-standardized estimation for E-loyalty ... 88
4.8.2.2. SEM under non-standardized estimation for E-loyalty ... 90
4.8.2.3 E-loyalty Model Fitness ... 92
Chapter 5: conclusion ... 93
5.1. Overview ... 93
5.2. Research finding... 94
5.2. Managerial Implication ... 96
5.3. Limitations ... 98
5.4. Future research ... 99
6. References ... 100
List of Figures
FIGURE 1:GUMMERUS MODEL ... 36
FIGURE 2:ANDERSON MODEL ... 38
FIGURE 3:RIBBINK MODEL ... 39
FIGURE 4:SEMEIJN ET ALL,2005MODEL ... 40
FIGURE 5:RODGERS MODEL ... 41
FIGURE 6:CONCEPTUAL MODEL ... 45
FIGURE 7:E-SATISFACTION MEASUREMENT MODEL UNDER THE NON-STANDARDIZED ESTIMATION ... 68
FIGURE 8:E-SATISFACTION MEASUREMENT MODEL UNDER STANDARDIZED ESTIMATION ... 70
FIGURE 9:E-TRUST MEASUREMENT MODEL UNDER THE NON-STANDARDIZED ESTIMATION ... 74
FIGURE 10:E-TRUST MEASUREMENT MODEL UNDER STANDARDIZED ESTIMATION ... 77
FIGURE 11:E-QUALITY MEASUREMENT MODEL UNDER THE NON-STANDARDIZED ESTIMATION ... 81
FIGURE 12:E-QUALITY MEASUREMENT MODEL UNDER THE STANDARDIZED ESTIMATION ... 83
FIGURE 13:MEASUREMENT MODEL UNDER THE STANDARDIZED ESTIMATION ... 87
FIGURE 14:E-LOYALTY MEASUREMENT MODEL UNDER THE NON-STANDARDIZED ESTIMATION ... 89
FIGURE 15:E-LOYALTY MEASUREMENT MODEL UNDER THE STANDARDIZED ESTIMATION ... 90
List of Tables
TABLE 1:MODELS COMPARISON ... 42
TABLE 2:CONSTRUCTS AND MEASURES ... 53
TABLE 3:SUMMARY OF DEMOGRAPHIC INFORMATION ... 59
TABLE 4:RELIABILITY STATISTICS FOR E-LOYALTY MODEL ... 60
TABLE 5:SUMMARY ITEM STATISTICS FOR E-LOYALTY MODEL ... 60
TABLE 6:KMO AND BARTLETT'S TEST ... 62
TABLE 7:TOTAL VARIANCE EXPLAINED ... 62
TABLE 8:COMMUNALITY ... 63
TABLE 9:FRIEDMAN'S TEST ... 64
TABLE 10:FRIEDMAN'S TEST FOR MEAN RANK ... 65
TABLE 11:RELIABILITY STATISTICS FOR E-SATISFACTION ... 66
TABLE 12:ONE-SAMPLE T-TEST FOR E-SATISFACTION ... 67
TABLE 13:CORRELATION MATRIX BETWEEN E-SATISFACTION VARIABLES ... 70
TABLE 14:MODEL FITNESS FOR E-SATISFACTION ... 71
TABLE 15:RELIABILITY STATISTICS FOR E-TRUST ... 72
TABLE 16:ONE-SAMPLE T-TEST FOR E-TRUST ... 73
TABLE 17:CORRELATION MATRIX BETWEEN E-TRUST VARIABLES ... 76
TABLE 18:MODEL FITNESS FOR E-TRUST ... 78
TABLE 19:RELIABILITY STATISTICS FOR E-QUALITY ... 79
TABLE 20:ONE-SAMPLE TEST FOR E-QUALITY ... 80
TABLE 21:MODEL FITNESS FOR E-SATISFACTION ... 85
TABLE 22:RELIABILITY STATISTICS FOR E-LOYALTY... 85
TABLE 23:ONE-SAMPLE TEST FOR E-LOYALTY ... 86
TABLE 24:MODEL FITNESS FOR E-SATISFACTION ... 87
TABLE 25:MODEL FITNESS FOR E-SATISFACTION ... 92
Chapter 1
Introduction and Preliminary
Chapter 1: Introduction and preliminary
In this chapter, we express the importance of e-businesses growth and e-commerce activity, then, we identify three important research problems from the seller’s perspective and benefits of customer loyalty for companies. Finally, the objectives of research and key word definition will be presented.
1.1. Introduction
In the first quarter of 2002, US retail e-commerce sales were up 19% from the same period in 2001 and accounted for $9,849 million or 1.3% of all sales (US Department of Commerce, 2002). Forrester.com Internet consultants (2000) reports that customers are significantly more likely to repurchase products from their e-stores than from traditional retail outlets; that is, e- stores are „„sticky‟‟ (Reichheld and Schefter, 2000). Overall, the dominant e-shopping developments are that (a) the percentage of total retail sales accounted for by e-commerce is likely to continue growing and (b) the majority of e-tailors seem to enjoy more customer loyalty than do their bricks and mortar competitors (Forrester.com, 2000).
In addition, according to the U.S. Census Bureau‟s Monthly Retail Trade Survey, Internet retail sales for 2000 were $25.8 billion, or 49% higher than 1999 sales of $17.3 billion . Also, This rapid growth of e-retailing reflects the compelling advantages that it offers over conventional brick-and-mortar stores, including greater flexibility, enhanced market outreach, lower cost structures, faster transactions, broader product lines, greater convenience, and customization (Srinivasan et al, 2002). However, e-retailing also comes with its own set of challenges.
Competing businesses in the world of electronic commerce are only a few mouse clicks away.
As a result, consumers are able to compare and contrast competing products and services with minimal expenditure of personal time or effort(Srinivasan et al, 2002).According to Kuttner (1998, p. 20), “The Internet is a nearly perfect market because information is instantaneous and buyers can compare the offerings of sellers worldwide” . The result is fierce price competition and vanishing brand loyalty.” Given the reduction in information asymmetries between sellers and buyers, there is a growing interest in understanding the bases of customer loyalty in online environments (Srinivasan et al, 2002).
1.2. Research Importance from seller’s Perspective
From a seller‟s perspective, customer loyalty has been recognized as a key path to profitability. The high cost of acquiring customers renders many customer relationships unprofitable during early transactions (Reichheld & Sasser, 1990).
With millions of web sites clamouring for attention, e-retailers have a tenuous hold at best on a large number of “eyeballs.” In order to reap the benefits of loyal customer base, e-retailers need to develop a thorough understanding of the antecedents of e-loyalty, that is, customer loyalty to a business that sells online. Such an understanding can help e-retailers gain a competitive advantage by devising strategies to increase e-loyalty (Srinivasan et al, 2002).
The cost of acquiring new customers online means that loyalty becomes an economic necessity for the e-store (Reichheld and Schefter, 2000). While financial drivers result in more efficient systems resulting in a fall in customer acquisition costs (CyberAtlas, June 12, 2002), „„for most, . . . average customer acquisition cost is higher than the average lifetime value of . . . customers‟‟
(Hoffman and Novak, 2000, p. 179). In addition to customer acquisition costs, retaining and winning back lost customers require a variety of ongoing costs (Griffin and Lowenstein, 2001a,b) such as marketing expenditures that help to build value equity (i.e., quality and convenience), brand equity (e.g., awareness and image), and relationship equity (e.g., loyalty or rewards programs) (Rust et al., 2000). Customer acquisition/retention costs remaining greater than the revenue generated from the customer, would clearly lead to the financial ruin of the organization concerned (Balabanis et al,2006).
1.3. Research Problem
In this section, we investigate three main problems which are the most important for e- businesses for survival, too much switching, switching cost, and competition. However, to overcome these switching barriers, companies had to invest on customer for long term
relationship. In addition, the Internet has been commercialized it has created an intense competitive environment among organizations and forcing them to extend traditional marketing practices and focus on developing long-term relationships with customers to ensure their retention and loyalty (Papadopoulou et al, 2001)
1.3.1. Too much switching
While an increase in marketing efficiency can help to decrease the costs associated with each order, an increase in the lifetime value of the customer (CyberAtlas, June 12, 2002), extending the length and/or depth of the relationship between customer and e-tailer is more likely to result in a sustainable competitive advantage for the company. This advantage is most likely to be achieved by increasing the length of time customers stay with the company, or by increasing the frequency and value of customers‟ transaction (Balabanis et al, 2006). Competing businesses in the world of electronic commerce are only a few mouse clicks away. As a result, consumers are able to compare and contrast competing products and services with minimal expenditure of personal time and effort (Srinivasan et al., 2002).
1.3.2. Switching cost
Jones et al. (2002, p. 441) define switching costs as „„the perceived economic and psychic costs associated with changing from one alternative to another.‟‟ Switching costs include time, effort, and financial costs such as those associated with training to use a new piece of equipment.
Perceived switching barriers are „„consumer perceptions of [the] time, money and effort associated with changing service providers‟‟ (Jones et al., 2000, p. 262). Broadly, research in traditional shopping environments has shown that switching barriers include factors such as interpersonal relationships with sales staff and/or the relative attractiveness of alternative suppliers (Jones et al., 2000).
Now days, it has been a very common understanding that the cost of acquiring a new customer is very much higher than the costs of customer retention because customer retention leads to a greater long-term profitability(Balabanis et al,2006). Finally, the products being sold do not vary across e-tailers, the basis of competition shifts to pricing, assortment, and service (Alba et al., 1997).
1.3.3. Competition
These days, businesses are facing fierce and too aggressive competition in both domestic and global markets. In order to enhance their chances of survival and growth in this uncertain environment organizations are forced to restructure themselves, In addition, with the Internet and other telecommunications innovations drawing us ever closer to the economist‟s concept of a perfect market, many products and services will be increasingly perceived more like commodities(Srinivasan et al, 2002). Consequently, as noted by Peterson (1997), electronic markets will lead to intense price competition resulting in lower profit margins(Cited by Srinivasan et al, 2002). For example, when a competitor introduces a similar product in the market then price usually becomes an issue and customer can easily switch for lower price or better terms because in transaction marketing the price sensitivity of customers is often high. To compete successfully, e-retailers will need to develop and maintain customer loyalty (Srinivasan et al, 2002).
1.4. Research Goals and Objectives
From the problem discussion above, the purpose of this study is to gain a deeper understanding of how to create and retain customer e-loyalty on website from company‟s perspective.
1.5. Key Word Definition
E-loyalty:
E-loyalty defined as a customer‟s favorable attitude toward the e-retailer that results in repeat buying behavior (Srinivasan et al, 2002).
E-satisfaction:
Oliver (1999, p. 34) defines customer satisfaction as the consumer‟s sense that consumption provides outcomes against a standard of pleasure versus displeasure.
E-trust:
E-trust will therefore be defined as the degree of confidence customers have in online exchanges, or in the online exchange channel.( Ribbink et al, 2004)
E-quality:
For the present study according to the Ribbink et al, 2004,five commonly used e-quality dimensions is ease of use; web site design; customization; responsiveness; and assurance.
Chapter 2
Literature review
Chapter 2- Literature review
In this chapter, first, we describe the history of customer loyalty, then, we discussing about benefits of customer loyalty and, finally, definition of customer e-loyalty.
2.1. Introduction
In the 1990s, the introduction of the World Wide Web on the Internet represents a turning point in electronic commerce, as it provides businesses with a cheaper way to carry out their activities, requires a minimal infrastructure investment and enables more diverse business activities. The advances in information technology and more recently, the Internet, offer a wide range of opportunities for companies to find new ways of contacting their businesses in order to cope with increased competition more efficiently and effectively (Kalakota & Whinston, 1997).
Organizations are deploying their information systems in order to, among other applications, co- ordinate their transactions with their customers and other business partners. (Kalakota &
Whinston, 1997)
The rapid increase in Internet usage and on-line shopping draws both business managers‟ and academic researchers‟ attention to consumer satisfaction and loyalty in the on-line environment.
The importance placed on on-line satisfaction and loyalty has increased because of the competitive nature of the on-line market, fueled by the increase in the number of on-line retailers and service providers. Now, it is easier and less costly for consumers to search for more product information and to comparison shop to arrive at a purchase decision. The decreased consumer search cost and increased competition makes it more important for marketers to build and maintain consumer loyalty (Rodgers et al, 2005).
2.2. Customer loyalty history
Brown (1952) classified loyalty into four categories, (a) Undivided loyalty, (b) Divided loyalty, (c) Unstable loyalty, and (d) No loyalty, based on the purchase patterns of consumers.
In addition to repeat purchases that lead to increases in the number of products bought, loyalty relates to an enhanced resistance to competitive messages, lower selling costs, a decrease in price sensitivity, and an increase in favorable word-of-mouth (Zeithaml, 2000). Indeed, research
shows that retaining customers is a more profitable strategy than only increasing market share or decreasing costs (Zeithaml, 2000). Creating loyalty depends on meeting the needs of the customer better than competitors do (Reynolds and Beatty, 1999).
Nevertheless, a number of mostly practitioner-oriented studies examine how Internet companies can retain customers. For example, Smith (2000) proposed that online loyalty is driven by brand image, prices, product quality and service. She further suggested that the design and content of the web site and continuous communication/dialogue with the customers accompanied with an appropriate rewards program to be important to customer retention (Reynolds and Beatty, 1999).
Customer loyalty is strongly associated with the customer‟s willingness to continue in a relationship, however customers switching behavior has a direct and strong affect on loyalty.
Customer loyalty can be understand in different ways depending upon the nature of the product or service which is being offered to a customer, for example, a bank customer is typically loyal as long as he holds an account with bank and switch when he change his account. On the other hand, the owner of a Mercedes can only show his loyalty to its brand when he make a same purchase next time. Furthermore, a customer can demonstrate his loyalty to a brand by showing his commitment and by providing a positive word-of-mouth to friends. With connection to the loyalty, it is a general rule that service quality and customer satisfaction has strong affect on customer retention (Reynolds and Beatty, 1999). The concept of e-loyalty extends the traditional loyalty concept to online consumer behavior. Customer loyalty has a direct impact on the revenue and profitability of a company. The e-loyalty of customers will be negatively related to customers search for alternatives and positively related to their word-of-mouth, behavior and willingness to pay more (Srinivasan et al, 2002)
2.3. Benefits of Customer Loyalty
The first step to understand the benefit of customer retention in business is to calculate
customers that affect the cash flows. Following are some of the benefits of customer retention according to the Reichheld, (1996).
2.3.1. Acquisition Cost
To attract a customer every business invests money in different styles like, advertising directed to new customers, commissions on sale to new customers, sales force overhead and so.
The example of a credit card company best fits in this situation where to get a response of 2 to 3 percent, a credit card company has to mail out fifty thousand customers or more to receive just one thousand applications. If we calculate the cost of acquiring a new customer it includes, credit evaluation, card issuance, and cost of putting a new bank account into the bank‟s data processing system, it reaches from $50 to $100 (Reichheld, 1996). We all know that existing customers are always worth more than new customers. They spend more and are more responsive to offers. A significant part of marketing should be spent on both retaining and developing best customers.
Because a company understands more about its existing customers than the new one has (Reichheld, 1996).
2.3.2. Referrals
An important benefit of long-term customer retention is that satisfied customers recommend the products to others. The customers who show up on the recommendation is more profitable and stay longer with the business than the customer who respond to advertising or price promotions. Since, people often associate themselves with the people; the results are good that referred customers will fit well with the products and services of the company. Those businesses who give rewards for good growth to advertising, brilliant marketing campaigns and sales people, their chances of profit are very high due to referrals (Reichheld , 1996).
2.3.3. Price Premium
It has been observed that old customers pay more prices than the new ones. This is sometimes is the result of trial discounts that is only available to the new customers. Almost all business use special introductory prices and special offers to new customers, but sometime they also use it for old customers, who think that they deserve more than new customers do. A retailer offers a coupon to all customers but finds that mature customers are less likely to use it. The customers who have been in strong relation with a business and have acquainted with full product line will almost get greater value from business relationship. So old customers are less price sensitive than new customers and they have developed their trust on company so they pay more than new customers (Reichheld , 1996).
2.3.4. Operating Cost
As customer is more familiar with the business, they become more efficient. They do not hesitate to put their request to the company for the services it does not provide. Familiarity with business takes the burden off from the employees of a company for information about the product. All this is due to understanding a new client‟s balance sheet, tax status, income profiles and risk management. While in this process client is in great touch with its consultant that develop a relationship and learning between client and consultant. The operating cost is higher when this relationship starts but when this relationship is established that result in lower operating cost. The cost and benefit are obvious in this situation but also the cost penalties when an employee is left the company and a new employee has to gain all client knowledge (Reichheld , 1996).
2.3.5. Revenue Growth
The advantage of retention of a customer in a business is that customer spending increase over time. The customer is full aware of all products in a store. If a customer is satisfied with the services he will develop trust and that will result in revenue growth. For example, in auto services, where a customer may come for wheel alignment or oil change can move on to more expensive items like tune-ups and tires if they like the services. According to estimate, average annual revenue per customer in auto service triples between the first five years. A credit card company can accelerate its loyal customer lifecycle and also the profit by offering rewards points and discount in prices to encourage the card holder to use their credit cards more often (Reichheld, 1996).
2.4.Customer E-loyalty definition
Customer loyalty has been defined as “a deeply held commitment to rebuy or repatronize a referred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior” (Oliver,1999, p. 34). Also, E-loyalty is all about quality customer support, on-time delivery, compelling product presentations, convenient and reasonably priced shipping and handling, and clear and trustworthy privacy policies (Reichfeld
& Schefter, 2000).According to the Srinivasan et al. (2002) e-loyalty defined as a customer‟s favorable attitude toward the e-retailer that results in repeat buying behavior. Also, e-loyalty is defined as the customer‟s favorable attitude toward an electronic business resulting in repeat buying behavior (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
2.5. Influencing Customer E-loyalty Factors
In this part, influential factors of customer e–loyalty are discussed. In addition, for each factor, e-satisfaction, e-trust, and e-quality, definitions and measures are investigated. Also, the relevant models for each factor will be explained.
2.5.1. E-satisfaction
Satisfaction, according to Oliver (1997) is “the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with a consumer‟s prior feelings about the consumer experience.” From his perspective, “satisfaction may be best understood as an ongoing evaluation of the surprise inherent in a product acquisition and/or consumption experience (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
However, A dissatisfied customer is more likely to search for information on alternatives and more likely to yield to competitor overtures than is a satisfied customer. Also, a dissatisfied customer is more likely to resist attempts by his or her current retailer to develop a closer relationship and more likely to take steps to reduce dependence on that retailer (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
In addition, Oliver (1999, p. 34) defines customer satisfaction as the „„consumer‟s sense that consumption provides outcomes against a standard of pleasure versus displeasure.‟‟ Satisfaction with e-tailers, like satisfaction with traditional retailers, is not derived solely from the customer‟s satisfaction with the product purchased.( Balabanis et al,2006).
Also, e-satisfaction is defined as the contentment of the customer with respect to his or her prior purchasing experience with a given electronic commerce firm (Anderson, Rolph E., &
Srinivasan, Srini S, 2003).
Anderson and Srinivasan (2003) tested whether the impact of customer satisfaction on
e-loyalty was moderated by business level factors (i.e. trust, perceived value) and individual factors (i.e. inertia, convenience motivation, and purchase size). Now individual factors are discussed briefly below:
Moderating Role of Inertia
Campbell (1997) defines inertia as a condition where “repeat purchases occur on the basis of situational cues rather than on strong partner commitment” According to Beatty and Smith (1987), around 40% to 60% of customers visit the same store for purchasing out of habit.
In a similar fashion, considerable proportions of customers bookmark their favorite electronic commerce Web sites and are more likely to visit them than other sites. These customers visit the sites out of habit rather than by conscious determination on the basis of perceived benefits and costs offered by the e-business. When a customer has a high level of inertia the sensitivity of e- loyalty to e-satisfaction is likely to be lower. On the other hand, when the inertia of a customer is low, the impact of e-satisfaction on e-loyalty is likely to be higher (Anderson, Rolph E., &
Srinivasan, Srini S, 2003).
Moderating Role of Convenience Motivation
The motivations of consumers vary widely. Although some customers are driven by the need to gather information and save money, others are driven more by the need for convenience (Anderson, Rolph E., & Srinivasan, Srini S, 2003). According to Burke (1997), Internet shoppers appreciate the ability to conduct business with any firm at any time while performing other activities such as exercising, cooking, or taking care of children. A survey conducted by Visa showed that 60% of Internet shoppers conducted their transactions in their pajamas (Romani, 1999). Customers driven by the need for convenience are less likely to inconvenience themselves by repeatedly searching for new providers for their products and services. Hence, they are more likely to exhibit higher levels of loyalty. In addition to contributing directly to customer loyalty, convenience orientation is also expected to indirectly affect the relationship between customer satisfaction and customer loyalty. For customers who are motivated somewhat by convenience,
but more so by other factors such as price seeking or information seeking, satisfaction will not have as much of an impact on loyalty because they are constantly exploring alternative service providers. However, the relationship between e-satisfaction and e-loyalty is expected to be stronger for customers with a high convenience orientation relative to customers with low convenience orientation (Anderson, Rolph E., & Srinivasan, Srini S, 2003)
Moderating Role of Purchase Size
Past researchers have found a positive relationship between purchase size (dollar amount spent by the customer) and loyalty. Therefore it is expected that e-satisfaction will have a stronger impact on e-loyalty for heavy spenders than for light spenders. Higher-spending customers are expected also to be more emotionally involved with their purchasing decisions (due to the increased financial and social risk of making a wrong decision) than low-spending customers (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
As noted by Kim, Scott, and Crompton (1997), there is a positive relationship between involvement and loyalty. Because high-spending customers are likely to be more personally involved in their decision-making, the relationship between e-satisfaction and e-loyalty is expected to be stronger for consumers who are heavy spenders. Conversely, because low spenders are likely to be less involved, the impact of e-satisfaction on e-loyalty is expected to be lower for them than for high-spending customers. (Anderson, Rolph E., & Srinivasan, Srini S, 2003), In addition , the impact of e-satisfaction on e-loyalty is also likely to be affected by business level variables such as trust and perceived value offered by the e-business. (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
Moderating Role of Trust
According to Singh and Sirdeshmukh (2000) “trust is a crucial variable that determines outcomes at different points in the process and serves as a glue that holds the relationship together.” In the electronic commerce context, customers who do not trust an e-business will not be loyal to it
even though they are generally satisfied with the e-business. Therefore, it seems apparent that e- satisfaction is likely to result in stronger e-loyalty when customers have a higher level of trust in the e-business. (Anderson, Rolph E., & Srinivasan, Srini S, 2003).
Moderating Role of Perceived Value
Zeithaml (1988) defines value as “the consumer‟s overall assessment of the utility of a product based on perceptions of what is received and what is given.” The importance of perceived value in electronic commerce stems from the fact that it is easy to compare product features as well as prices online. The reduction in search costs not only increases the likelihood that customers will compare prices, but also enables the customers to compare the array of benefits that they will derive from the products and services that they buy(Anderson, Rolph E., &
Srinivasan, Srini S, 2003).
Perceived value contributes to the loyalty of an electronic business by reducing an individual‟s need to seek alternative service providers. When the perceived value is low, customers will be more inclined to switch to competing businesses in order to increase perceived value, thus contributing to a decline in loyalty. Even satisfied customers are unlikely to patronize an e- business, if they feel that they are not getting the best value for their money. Instead, they will seek out other sellers in an ongoing effort to find a better value. The relationship between e- satisfaction and e-loyalty appears strongest when the customers feel that their current e-business vendor provides higher overall value than that offered by competitors( Anderson, Rolph E., &
Srinivasan, Srini S, 2003)
2.5.2. E-trust
Trust is proposed as another important antecedent of loyalty (Reichheld et al., 2000). The trust concept has been studied in a number of disciplines, and various definitions have been proposed (Lewicki et al., 1998). Trust is consistently related to the vulnerability of the trustor (Singh and Sirdeshmukh, 2000), because without vulnerability of the trustor upon the trustee,
trust becomes irrelevant. In business studies, trust has been found to be important for building and maintaining long-term relationships (e.g. Singh and Sirdeshmukh, 2000).
This definition is in accordance with early research, which associated trust with a “confidence in the other‟s intentions and motives”, a definition that still holds (Lewicki et al., 1998, p. 439).
E-trust will therefore be defined as the degree of confidence customers have in online exchanges, or in the online exchange channel. ( Ribbink et al, 2004). while trust appears to be especially important for creating loyalty when the perceived level of risk is high (Anderson and Srinivasan, 2003).
E-trust is expected to affect customers‟ willingness to purchase online (Reichheld and Schefter, 2000), but empirical evidence is lacking..
With the regard to e-trust, Ha (2004) identify six factors – security, privacy, brand name, word- of-mouth, good online experience, and quality of information. – that generate brand trust on web.
These six factors use the characteristics of the online environment to facilitate customers‟ ability to purchasing goods or services. We briefly explain these six factors:
Security
According to Ha (2002), brand reputation affects perceived risk and we would expect security decrease risk perceptions . On the other hand, Krishnamurthy (2001) also found that consumers who experience positive security leads to improvements in the levels of familiarity on the Web.
Privacy
Hoffman et al. (1998) showed that top online shopping concerns of Web consumers relate to control over information privacy and trust. Their studies also found that the most important reasons non-buyers, who are uninterested in online shopping, give for not shopping online are not functional, but related to issues of control over personal information.
Furthermore, privacy on the Web means risk perceptions towards exposing the consumer‟s own information. In other words, negative consequences may arise from distribution of private information, and Web site protection would reduce the perception of such risk (Ha, 2004).
Brand name
Keller (1998) states that brand name is one of the factors facilitating the development of brand awareness or familiarity. In general, the more specialized and reputable a brand is in selling or recognizing the product or the service, the more highly will its brand trust be perceived. This finding means that the consumer perceived the Web store‟s reputation as favorable brand name ( Ha, 2004).
Word-of-mouth
Word of mouth (WOM) is commonly defined as informal communication about the characteristics of a business or a product which occurs between consumers (Westbrook, 1987).
Research generally supports the claim that WOM is more influential on behavior than other marketer-controlled sources (e.g. advertising) (Ha ,2004). WOM has been shown to influence awareness, expectations, perceptions, attitudes, behavioral intentions and behavior. In particular, a further determinant of brand trust is WOM communication (Ha, 2004).
We assume that WOM among satisfied community members will improve e-trust on a particular Web site. In this way, positive WOM communication helps consumers cultivate favorable brand trust on the e-commerce (Ha, 2004).
Good online experience
Consumers tend to remember best the last experience (the “recent effect”) thus one positive experience may be sufficient to alter perceptions of more than one preceding negative experience, and vice versa ( Ha, 2004).
Relationship depends on a consumer‟s experience. Similarly, brand trust can be related to experience. In the model of “trusting behavior”,Mitchell et al. (1998) see experience as an
important variable as it plays a role in trust by making it possible to compare the realities of the firm with preconceived expectations.
Quality of information
Krishnamurthy (2001) argues that consumers on the Web are greatly interested in the associated messages. Indeed, Ha (2002) has shown that Internet users are very interested in customized information offered by Web sites. Hence, whether perceived quality of information is provided and, if it is provided, the quality of customized information for customers, also influence the level of brand trust on the Web (Ha, 2004)
2.5.3. E-quality
Typical service-quality measures include various dimensions of end user service such as tangibility, reliability, responsiveness, assurance, and empathy (Parasuraman, Berry, & Zeithaml, 1991). E-service quality dimensions are occasionally considered to be causing e-loyalty directly (Srinivasan et al., 2002), a majority of studies view them as antecedents of e-satisfaction such as(Szymanski and Hise, 2000;) satisfaction is conceptualized as a mediator of the relationship between quality and loyalty ,yet, there is no consensus on he exact nature or number of quality dimensions that customers consider when evaluating e-services (c.f. Srinivasan et al., 2002).
For the present study according to the Ribbink et all, 2004, five commonly used e-quality dimensions are ease of use, web site design, customization, responsiveness, and assurance, which briefly discussed below:
Ease of use
Website design
Customization
Responsiveness
2.6. E-loyalty and E-satisfaction Models
In this section, models of e-loyalty and e-satisfaction elaborated and, finally, the table of comparison in addition to limitations for each models will be discussed.
2.6.1. Model of Szymanski
According to the Szymanski and Hise (2000) an initial examination for e-satisfaction were done, which investigated the following constructs:
convenience
product information
site design
financial security have
Moreover, all constructs, had significant influence on e-satisfaction levels. Also a popular topic of discussion in e-commerce is the financial security of online transactions. The emphasis on security issues is motivated primarily by the descriptive data documenting that financial security is of foremost concern to consumers when deciding whether to buy online (Szymanski and Hise, 2000).
In addition to the financial security of online transactions, discussions of e-commerce frequently address the perceived merchandising benefits of e-retailing ,that is, wider assortments and richer information. These benefits are discussed often in the context of
superior e-merchandising motivating people to shop online (Szymanski and Hise, 2000). We document that, on average, perceptions of superior merchandising do not have a dramatic impact on e-satisfaction among e-buyers. In fact, among the shoppers we surveyed, greater breadth of offerings had no unique impact on e-satisfaction levels. Although superior product information did impact e-satisfaction to a statistically significant degree, it can be argued that the practical significance of this effect is not great. Besides, Good site design includes having fast,
uncluttered, and easy-to-navigate sites. Convenience includes saving time and making browsing easy. All told, these findings imply that giving special attention to convenience, site design, and financial security may produce the most positive outcomes pertaining to e-satisfaction. These three elements display the greatest effect on e-satisfaction among the e-buyers we surveyed (Szymanski and Hise, 2000).
2.6.2. Model of Srinivasan
With the regard to website characteristics, Srinivasan et al. (2002) identify seven factors – customization, contact interactivity, cultivation, care, community, choice and character – that generate e-loyalty. These seven factors use the characteristics of the online environment to facilitate customers‟ ability to get to and find out about the products of interest to them. We briefly explain these seven factors:
Customization
Customization is the ability of an e-retailer to tailor products, services, and the transactional environment to individual customers. Also, customization is operationally defined as the extent to which an e-retailer‟s web site can recognize a customer and then tailor the choice of products, services, and shopping experience for that customer. There are multiple reasons why customization is expected to affect e-loyalty. Customization increases the probability that customers will find something that they wish to buy (Srinivasan et al, 2002).
Contact interactivity
Contact interactivity refers to the dynamic nature of the engagement that occurs between an e- retailer and its customers through its web site. Also, contact interactivity is operationally defined as the availability and effectiveness of customer support tools on a website, and the degree to which two-way communication with customers is facilitated. Contact interactivity is expected to have a major impact on customer loyalty for multiple reasons (Srinivasan et al, 2002).
Cultivation
Cultivation is the extent to which an e-retailer provides relevant information and incentives to its customers in order to extend the breath and depth of their purchases over time.Also, cultivation is operationally defined as the frequency of desired information and cross-selling offers that an e- retailer provides to customers. By actively cross selling its products, a firm can provide customers with useful information that would be cumbersome to obtain otherwise. For example, Amazon.com reaches out to its customers with offers on books related to their past purchases.
Online men‟s apparel retailer Paul Frederick updates its customers by email whenever there is a discount sale on items of clothing that are similar to items previously purchased by them. An additional benefit of such cycles of stimuli and responses is that the retailer‟s knowledge base regarding the customer is continuously enhanced, lessening the customer‟s incentive to defect to another seller who has to build such knowledge from scratch. Further, with such initiatives, an e- retailer can proactively diminish the likelihood of additional search by customers ( Srinivasan et al , 2002).
Care
Care refers to the attention that an e-retailer pays to all the pre and post purchase customer interface activities designed to facilitate both immediate transactions and long term customer relationship. Also, care is operationally defined as the extent to which a customer is kept informed about the availability of preferred products and the status of orders, and the level of efforts expended to minimize disruptions in providing desired services ( Srinivasan et al , 2002).
Community
A virtual community can be described as an online social entity comprised of existing and potential customers that is organized and maintained by an e-retailer to facilitate the exchange of opinions and information regarding offered products and services. For example, customers of an online bookstore that supports a community can, before buying a particular book, access the opinions of other customers who have purchased it. Moreover, after reading the book themselves, they can add to this collection of opinions ( Srinivasan et al , 2002).
Choice
Compared with a conventional retailer, an e-retailer is typically able to offer a wider range of product categories and a greater variety of products within any given category. A store in a mall is constrained by the availability and cost of floor space, whereas its online counterpart does not have such limitations. E-retailers can also form alliances with other virtual suppliers to provide customers with greater choice. To illustrate, an e-retailer may keep only a limited assortment of a given product category in inventory but can form alliances with other suppliers and manufacturers that can ship products to customers of the e-retailer from their own, more extensive inventories. However, the customer has seamless access to the entire range of products carried by the alliance from the e-retailer‟s website. The e-retailer that offers greater choice can emerge as the dominant, top-of-mind destination for one-stop shopping, thereby engendering e- loyalty (Srinivasan et al , 2002).
Character
Creative website design can help an e-retailer build a positive reputation and characterization for itself in the minds of consumers. Character can be defined as an overall image or personality that the e-retailer projects to consumers through the use of inputs such as text, style, graphics, colors, logos, and slogans or themes on the website. Character is particularly important because web sites can be rather impersonal and boring to deal with in the absence of the person-to-person interaction that pervades conventional brick-and-mortar marketplaces. Beyond general presentation and image, websites can use unique characters or personalities to enhance site recognition and recall ( Srinivasan et al , 2002).
2.6.3. Model of Gummerus
It appears natural that trust enhances satisfaction, since trusting a service provider means that customers believe they will receive the promised service and experience a reduced level of risk.
fulfillment, security, responsiveness, and the Web site‟s technical functionality – is crucial for loyalty (Gummerus et al, 2004).
The finding and interpretation of Gummerus et al, (2004) are discussed below, as well.
Need fulfillment
is a strong predictor of trust and satisfaction. This is not surprising since it measures the degree to which customer requirements are catered for. Service customization has often been limited to elaborate technical systems that produce individualized web pages and personal service.
However, the present study demonstrates that perceived customization is more than a result of applying technological tools. When customers feel that they are a part of the company‟s target group and that their needs are being fulfilled, their satisfaction will increase. This emphasizes the importance of customer orientation and the implementation of segmentation in customer acquisition and relationship maintenance (Gummerus et al, 2004).
Security
Security, in the form of keeping customers safe from an invasion of their privacy, affects trust and satisfaction. If companies wish to maintain customer trust, they need to keep their promises regarding privacy. Since security is closely related to trust, violations of security norms may backfire in terms of losing customers and negative word-of mouth (Gummerus et al, 2004).
Assuring security may be especially important to services that require customers to share personal information with the service provider in order to receive the required services, especially when the associated risks are high. Companies should also carefully weigh the benefits of customization allowed by data collection against psychological costs to customers.
Unnecessary gathering of private data may frighten customers away. Customers should at least be allowed to out (Gummerus et al, 2004).
Responsiveness
