The Impact of New Relationship Tactics and Customer Value on Commitment

Transcription

1 The Impact of New Relationship Tactics and Customer Value on Commitment Abstract An emergent argument in marketing highlights that the ability to successfully manage customer relationships provides organizations with an opportunity to increase their value proposition and obtain competitive advantage. However, no studies have attempted to investigate the role of new service bonds as relationship tactics to customer value for long term sustainability. This study addresses this research gap by exploring the impact of new relationship tactics (namely new service bonds) on customer commitment through the creation of economic and relational values, with particular reference to a cultural industry. Findings showed that both traditional relationship tactics and new service bonds (service newness and service meaningfulness) affect customers perceived relationship investment. In addition, both knowledge and relational values partially mediate the relationship between relationship investment and customer commitment. Keywords: relational tactics, customer value, commitment 1

2 Introduction It has been argued that relationship management focuses on increasing the overall value for their customers and provides long-term benefits for the service providers in terms of customer retention, which is a critical strategy for leveraging profitability and the success of a firm (Reichheld & Sasser, 1990; Peppers & Rogers, 2004). Previous studies have shown support for the importance of various relational tactics in relationship investments for nurturing customer commitment in industries. It is suggested that customers respond to the relationship investment efforts of a firm with their commitment mainly out of reciprocity (De Wulf et al., 2001). Extant studies, however, are lacking in three regards. First, there is a paucity of studies that have attempted to investigate the role of new service bonds as part of relationship investment and the values that they create for customer commitment. No previous research compared the relative impact of relational tactics in customer relationship management. Secondly, the majority of studies posit that commitment is one of the outcomes of relationship investment and assume that customers reciprocate the relationship building efforts of a firm with their loyalty (e.g., De Wulf et al., 2001); however, previous research has overlooked the essential role of customer value in this relationship. We argue that a customer value perspective may be complementary to reciprocity theory in explaining the relationship between relationship investment and commitment. Our research therefore intends to fill the gap by empirically investigating the potential mediating roles of value mechanisms between relationship investment and commitment. Thirdly, previous studies in relationship marketing have tended to over focus on financial services, industrial and retail markets (Aurier & N Goala, 2010; Ernst et al., 2011). In the present study, the model is applied to a cultural industry context (i.e. museums). Research in marketing and particularly in relationship marketing is somewhat scant in this arena. Implications and recommendations from this research can be of value to both academia and practitioners. Relationship Investment, Perceived Values and Customer Commitment Perceived relationship investment refers to the perception of customers on the degree to which a service provider (museum in this paper) devotes resources, effort and attention to develop, maintain and strengthen the relationships with customers (De Wulf et al., 2001; Smith, 1998) and has been found to be affected by relationship marketing tactics through which commitment results (De Wulf et al., 2001). Previous studies have discussed and investigated the important roles of various relationship tactics. In the present study, they are regarded as traditional relationship bonds. The network approach considers both economic and relational bonds critical to relations between cooperating parties (cf. Chan et al., 2010). Consequently, we distinguish among three types of traditional relationship tactics distributed across level one bond (tangible rewards) and level two bond (information accessibility and interactive communication). Tangible rewards refer to tangible benefits such as pricing or gift incentives offered by organizations to their regular customers in return for customer loyalty. Previous studies have demonstrated that providing tangible rewards is an effective tool in customer relationship management (Peterson, 1995; Sharp & Sharp, 1997). Information accessibility describes the ease in obtaining the information as well as the availability and adequacy of the information of an organization. Such informational communication enhances the predictability of discovering behaviors of the other party (Smith & Barclay, 1997) as well as encourages feelings of trust, special status and closeness between both 2

3 exchange parties (Anderson & Narus, 1990). Interactive communication is described as the extent to which a customer perceives that the retailer interacts with customers in a warm and personal way (Metcalf et al., 1992). Previous research has evidenced that social relationship benefits can be obtained through interactive communication including feelings of familiarity, friendship and social support (Berry, 1995); fostering trust between exchange partners and aligning perceptions and expectations (Morgan & Hunt, 1994); and, acquainting and knowing customers personally (Crosby et al., 1990). In light of previous research, we hypothesize that: H 1a: Tangible Rewards of a museum is positively related to customers perceived relationship investment. H 1b: Information Accessibility of a museum is positively related to customers perceived relationship investment. H 1c: Interactive Communication of a museum is positively related to customers perceived relationship investment. New service development refers to the development of service products which are new to the supplier (Johne & Storey, 1998). New services were found to bear positive impact on both financial (i.e. enhancing sales and profitability of firms) and nonfinancial performance (i.e. customer loyalty, competitive advantage and reputation of a company) (e.g. Andrews & Smith, 1996; Chen et al., 2009). The present study includes two attributes of new service bonds, namely newness and meaningfulness. Service newness is defined as the degree to which an organization utilizes information to develop service output that is novel to the industry and challenges existing standards (Rindfleisch & Moorman, 2001). The meaningfulness dimension refers to the degree to which new services are perceived as appropriate and useful to target customers (Im & Workman, 2004). Offering and renewing novel and meaningful services affect customers perceptions on a relationship investment in that it signifies efforts and sincerity to satisfy its customers needs and building relationships with them, thereby positively influencing customers perceived relationship investment. Research on the advertising agency indicated that clients may break up the relationship with an agency when they feel that the agency no longer puts energy into producing creative ideas for them (e.g., Dowling, 1994). Hence, in addition to traditional bonds, the new service bond strengthens consumers perception of relationship investment of the service provider by signaling the additional commitment and sincerity of the service provider in its relationship building efforts. In light of the literature, we hypothesize that: H 2a: The newness of new service of a museum is positively related to customers perceived relationship investment. H 2b: The meaningfulness of new service of a museum is positively related to customers perceived relationship investment. Relationships between providers and customers can be successfully developed through a series of continued and iterative interactions through various bonds (both traditional and new tactics). Perceived relationship investment by customers provides the context from which commitment exists (cf. Hakansson & Snehota, 1995). In line with Morgan and Hunt (1994), this study defines relationship commitment as a consumer s inclination, desire and willingness to make efforts at remaining in a relationship over the long term. Commitment is viewed as one of the necessary requisites for a productive relationship (Morgan & Hunt, 1994). Commitment can result from economical concerns 3

4 regarding relationships and positive results that they can bear, as well as an emotional or psychological attachment towards the other exchange partner (Peppers & Rogers, 2004). Thus the idea of commitment is not only an important characteristic in establishing and maintaining a long-term relationship (Hennig-Thurau & Klee, 1997), but also an expression of the willingness that customers have in regard to engagement in relationships with retailers (Moorman et al., 1992; De Wulf et al., 2001). Customers acknowledgement of the committed relationship investment through various bonds often generates great desire of reciprocation. Our framework proposes that the perceived relationship between relationship investment and commitment is better understood through the mediating link of customer values. Building on the literature, we propose that perceived relationship investment is a driver of customer values and that the link existing between relationship investment and commitment (at least partially) is because of the underlying process through creating customer values. Previous studies maintained that with the use of products or services, values can be derived from consumers calculation of benefits against costs (e.g., Zeithaml, 1988), as well as relational bonds between customers and providers (e.g., Butz & Goodstein, 1996). Quality products or services must be translated into perceived values by customers in order for them to make a purchase decision (Zeithaml, 1988). In terms of museum visits, one main purpose of the visits at museums is to enhance ones artistic level of appreciation or acquire some sorts of particular knowledge which is named as benefit in Zeithaml s terminology (knowledge value) (Zeithaml, 1988). In addition, value can also be a consequence of the adoption of products or services that will facilitate collective goals (Butz & Goodstein, 1996). The museum visits of customers could strengthen the collective goals between museums and customers, which helps customers to build up emotional ties with museums (relational value). This creates both knowledge value and relational value to customers and consequently positively influences their level of commitment to the organization (Ganesan, 1994). Therefore, we argue that both knowledge and relational enhancements, as part of the mechanism, at least partially mediate the relationship between perceived relationship investment and commitment. Thus, we posit the following: H 3a: Knowledge value at least partially mediates the relationship between the perceived relationship investment of a museum and customers commitment to the museum. H 3b: Relational value at least partially mediates the relationship between the perceived relationship investment of a museum and customers commitment to the museum. Methods The proposed hypotheses were tested using a sample of 296 museum visitors in Hong Kong. Only regular customers of museums were included for whom relationship building is a more prominent phenomenon (cf. De Wulf et al., 2001). Based on the recommendations of museum experts, regular customers were identified as who have visited a museum at least two times in the previous year and do not object to regard themselves as museum lovers. Potential respondents were intercepted in the periphery of the five major museums under the authority of the Leisure and Cultural Services Department (LCSD) of the HKSAR. Respondents with age younger than 35 years old accounted for about 67.6%. The majority of the respondents (83.4%) had a monthly household income of no more than HK$30,000 (US$3,900). Most respondents reported a frequency of visiting the selected museums two to four times (77.7%) and the rest (22.3%) reported at least five times of visits in the previous year. 4

5 The proposed constructs were measure by 7-point Likert-type scales. Most measures were adapted from previous studies. The measures of newness and meaningfulness were adapted from Rindfleisch and Moorman (2001) and Im and Workman (2004) respectively. Tangible Rewards, Perceived Relationship Investment, and Commitment were adapted from De Wulf et al. (2001). The scale of Information Accessibility measured the perceived availability, accessibility, and adequacy of information about the museum and its exhibitions (Yang et al., 2005). Interactive Communication examined the perception of a museum customer on the extent to which museum staff interacted with customers in a professional and warm way (Cronin & Taylor, 1992). The proposed value mechanisms, knowledge value and relational value, were adapted from Nambisan and Baron (2010), and Chan et al. (2010) respectively. In addition to the proposed constructs, demographical and behavioral variables such as age, frequency of visit, customer relationship proneness, and customer participation were included as control variables. All constructs had Cronbach s alpha coefficients higher than the standard alpha of.70 (Nunnally, 1978), indicating satisfactory internal consistency reliability. The overall model fit statistics and indices suggested adequate model fit (χ 2 [724] = , p <.01; RMSEA =.052; CFI =.98; IFI =.98; NFI =.96). The composite reliability of each construct in our model is greater than the recommended level of.70. These together indicated sound internal structure of the CFA model (Baggozi & Yi, 1988). Average variance extracted (AVE) for each construct ranged from 0.65 to 0.82, all of them were higher than the recommended level of.50 (i.e. 50 per cent), greater than the squared correlation between any two constructs. This provides support for sufficient convergent validity and discriminant validity (Fornell & Larcker, 1981; Anderson & Gerbing, 1988). Common method bias was examined by adopting both Harmon one-factor test (Podsakoff & Organ, 1986) and the procedure recommended by Widaman (1985) and Podsakoff et al. (2003). The results of these tests suggest that common method variance is not a pervasive problem for this investigation. Data Analysis and Findings The proposed relationships were tested using structural equation modeling. LISREL 8.80 statistical package. Three models (direct-effect, partial mediation, and full-mediation models) were compared. Model comparisons with the chi-square difference test suggest that the partial mediation model was the best model (χ 2 /d.f. = 4.03; RMSEA =.073; CFI =.93; IFI =.93; NFI =.91) Impact of relational tactics on relationship investment: Hypotheses 1(a c) posited that the traditional relational bonds (i.e. tangible rewards, information accessibility, and interactive communication) were positively associated with customers perceived relationship investment. As proposed, the paths between tangible rewards (γ =.22, p <.01), interactive communication (γ =.14, p <.05) and perceived relationship investment were significant and positive. Thus, H1a and H1c were supported; however, the path coefficient between information accessibility and perceived relationship investment revealed no statistical significance (γ =.10, n.s.), lending no support for H1b. In terms of the impacts of new service bonds (i.e., newness and meaningfulness) on perceived relationship investment (H2a and H2b), results found support for the proposed relationships with a coefficient of.26 (p <.01) and.19 (p <.05) respectively. Therefore, both H2a and H2b were supported. The mediating roles of knowledge value and relational value: H3a and H3b proposed two potential mediators, knowledge value and relational value, for the relationship between perceived 5

6 relationship investment and commitment. As discussed previously, the partial-mediation model has the best fit among three models. Table 4 indicated that paths between relationship investment and knowledge value mechanism (γ =.28, p <.01) and relational value mechanism (γ =.31, p <.01) were significant and positive. The paths between knowledge value mechanism, relational value mechanism and commitment were also significant and positive, with a coefficient of.19 (p <.05) and.16 (p <.05) respectively. Meanwhile, the direct link between relationship investment and commitment were revealed significant and positive (γ =.18, p <.05), thus supporting H3a and H3b. The significance of the indirect effects of perceived relationship investment on commitment through two mechanisms was further tested by Sobel s test. Results showed significant indirect effects of relationship investment on commitment through the knowledge value mechanism (Sobel Test = 4.62, p <.01) as well as through the relational value mechanism (Sobel Test = 4.51, p <.01), in support of the mediating roles of the two proposed mechanisms (H3a and H3b). Discussion Extant studies usually focus on some conventional bond-building tactics but this study advances the research stream by integrating a new perspective new service bonds with conventional tactics. Findings supported that new service bonds were found to exert significant positive influence, in addition to the conventional tactics, on customers perceived relationship investment. Findings also indicated the significant impact of tangible rewards and interactive communication on perceived relationship investment. However, no significant association between information accessibility and perceived relationship investment was found. This might be due to the fact that Hong Kong is a highly commercialized society. Information is easily accessible from various channels and consumers are used to a high exposure to diverse information. As a result, consumers may perceive information accessibility as a necessary tool for museum operations but may not regard it as a special effort made by a museum to build up relationships with them. In addition, previous studies mainly rely on the reciprocity principle to explain the impact of relationship building efforts of an organization on customer commitment (e.g. Houston & Gassenheimer, 1987). This study showed evidence for additional alternative mechanisms underlying the effect of customers perceived relationship investment on their commitment to the organization such as value mechanisms. Relationship investment has both direct impact and indirect impact on customer commitment through creating both knowledge and relational values. Service providers are suggested not to overlook the importance of traditional relationship bonds, such as tangible awards and interactive communication, on perceptions of relationship investment. In addition, service providers and managers are urged to incorporate new service development into building and maintaining customer relationships, which may be a more effective tool. Managers are reminded of the importance of offering unique and meaningful new service in motivating customers to continue with the relationship. In addition, the study stressed the role of value creation in the service processes. It is recommended that apart from the principle of reciprocity, the relational investment efforts of a service provider result in more committed customers through enhancing both economical (knowledge) value and relational values to customers. There needs to be a mind shift from a goods-centered to a service-centered logic for marketing (Vargo & Lusch, 2004), in which customers adopt a more holistic perspective by taking into account not only economic gains or losses but also relational strengths. All statistical results were omitted due to space constraints. 6

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