Pascale G. Quester School of Commerce, University of Adelaide, Adelaide, Australia. Introduction

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1 : perceived value in market orientation practice Shu-Ching Chen School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan, People s Republic of China, and Pascale G Quester School of Commerce, University of Adelaide, Adelaide, Australia Abstract Purpose This study developed a model of customer store loyalty for retail service based on a value-based market orientation practice, staff performance and customer satisfaction Design/methodology/approach A comprehensive qualitative study was undertaken to develop measurements, derived from both perspectives of firms and consumers The model was then tested empirically in a retail setting in Taiwan, using a dyadic data collection approach For each service provider from a random sample of hairdressing salons in Taiwan included in our survey, a matched set of customers provided information concerning their expectation and evaluation of service Findings Our findings provide an insight into the effect of perceived customer value in market orientation practice as well as its impact on customer retention The model indicates that marketing practitioners should manage customer satisfaction and perceptions of value in their implementation of market orientation as they are directly related to customer store loyalty Research limitations/implications This study involved only one service industry (hairdressing salons) in one country (Taiwan) However the scales and methodology described here could and should be replicated in other settings Practical implications By using our scale and results, service providers may be able to enhance their customers perception of value and increase their degree of store loyalty Originality/value Despite the importance of customer value for organizations seeking to become market oriented, customer value measures are not included in market orientation scales This study shows how including customer value into market orientation measurements can assist in enhancing business performance via customer retention Keywords Market orientation, Customer loyalty Paper type Research paper An executive summary for managers can be found at the end of this article Introduction Loyal customers are the lifeblood of an organization, regardless of its scale and business scope In order to maximize business profit, it is critical to keep a customer with ultimate loyalty (Oliver, 1999) For this reason, any organization must strive to keep loyal customers as long as possible This is the reason behind the popularity of customer loyalty programs developed by marketing practitioners, and that of data mining techniques used by researchers for identifying loyal customers Yet, despite efforts for attracting and retaining customers, customer attrition exists for every organization In the case of retailing, the blooming stores coexist with declining ones in most commercial precincts According to Levitt (1960), based on his study of several large The current issue and full text archive of this journal is available at wwwemeraldinsightcom/ htm 20/3 (2006) q Emerald Group Publishing Limited [ISSN ] [DOI / ] American manufacturers, such variation is due to the existence, or non-existence, of market orientation An overview of the market orientation literature suggests that a consideration of personnel s implementation is imperative (eg Siguaw et al, 1994) The importance of front-line employees contribution to an organization s business performance is generally acknowledged (eg Mengüç, 1996; Reynolds and Beatty, 1999) Indeed, frontline employees play a critical role in the interaction with customers by representing their organizations (eg Westbrook, 1981) The employees interaction with customers significantly influences customers overall satisfaction and their willingness to remain with the organization (Mittal and Lassar, 1996) Past studies suggest a mediating role of personnel interaction between market orientation and business performance, although this has not yet been fully explored in the research domain of market orientation In the retail service context in particular, the store personnel should have a decisive influence on the organization s market orientation performance since they are the key implementers of market orientation The most challenging suggestion emerging from the literature on market orientation is that an organization ought to continually create superior customer value (Narver and Slater, 1990) However, the dimensions of customer value have not been clearly specified: with what means and in what context customer value can be created remains to be explored Given the theoretically imperative role of customer 188

2 Shu-Ching Chen and Pascale G Quester value in market orientation, integrating customer value in relevant studies should clarify its potential contribution to market orientation Specifically, understanding how service employees deliver value as well as how customers perceive and react to it in a service context should provide new insights into the effect of market orientation on business performance This is the primary objective of this study Finally, a review of the market orientation literature suggests that little effort has been made to explore the relationship between market orientation and non-financial performance indicators such as customer satisfaction and customer retention Most studies of market orientation have examined business performance outcomes using traditional financial indices (eg Greenley, 1995; Appiah-Adu, 1998) A broader view of business performance outcomes, involving a variety of non-financial indicators, is clearly needed to enhance our understanding of the potential business performance implications of market orientation In this study, a review of the relevant literature provides the theoretical basis for developing a conceptual model A qualitative study is then conducted to identify the possible dimensions of the proposed model from the perspectives of both firms and consumers An empirical examination of the proposed model is subsequently performed in the retail industry in order to examine its validity and reliability The outcome of this model is examined through the major business performance index of store loyalty Following this, we provide a discussion of the results and consider their implications for theory and practice We also discuss the limitations of the study, and suggest future research directions Definitions of market orientation and customer value This study adopted Narver and Slater s (1990) definition of market orientation That is, market orientation is the organization culture that most effectively and efficiently creates the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance for the business (Narver and Slater, 1990, p 21) Narver and Slater (1990) claim that an organization can achieve a longer lasting business performance if creating superior customer value is the way to gain a sustainable competitive advantage Examples of this can clearly be seen in practice: the top retailers 7-11 convenience store (USA) and Tesco supermarket (UK) provide convenience for late night customer shopping by providing 24 hours and year round opening hours All of them achieve their prominent business position by a sustainable competitive advantage of delivering superior customer value in their business strategy The term value used in this study refers to a judgment of preference by consumers (Taylor, 1961) In this study, it is defined based on previous theoretical and empirical studies relevant to the current research purpose A review of the literature on customer value suggests that it would involve various dimensions, including intrinsic and extrinsic ones under the rational and experiential perspectives of value: monetary/attribute and non-monetary/experiential values (Hartman, 1967; Holbrook and Hirschman, 1982; Zeithaml, 1988) Since the value perceived and preferred by consumers can be varied (Ganesh et al, 2000), market orientation practice must be considered across varied dimensions of customer value An integration of these perspectives constitutes the basis for exploring the meaning and dimensions of customer value in market-oriented services from the perspectives of both firms and consumers Research hypotheses In light of our research purpose, the interaction between service employees and their customers is examined Two focal points are underlined in this relationship: one is understanding how service employees appraise their own performance of implementing market orientation by means of fulfilling customer value (staff performance); and the other is assessing service employees market orientation performance in relation to customer value from the consumer perspective, and the impact of the above consumers perceptions on their attitude (customer satisfaction) and behavior (customer store loyalty) Hence, this study examines the relationships among these key variables in two types of causal sequence such that staff performance leads to customer satisfaction, which in turn impacts on customer store loyalty The other one is staff performance directly leads to customer store loyalty Relationship between staff performance and customer satisfaction The interaction of service employees and their customers in an exchange process is a critical point or moment of truth (Carlzon, 1987) In order to engage customers in an exchange process and keep them in a long-term relationship, satisfying customers is important Customer satisfaction is the critical factor of customer loyalty (Kotler, 1994), and customers with higher satisfaction tend to be retained In a service setting, customers can easily assess the service performance of employees due to direct contact Thus, an employee s effort to implement market orientation has an impact on customers satisfaction Moreover, a value-added service is considered an efficient means to satisfy customer better (Grönroos, 1984) Most studies suggest the importance of value in the pursuit of customer satisfaction Customer perceived value reinforces customer satisfaction (McDougall and Levesque, 2000), especially when the value is consistent with customers expectations and is based on a prior understanding of customers (Dall Olmo Riley and de Chernatony, 2000) As the success or failure of the service provided depends on customers (Meyer and Blümelhuber, 2000), they must define what customer value is (Weinstein and Johnson, 1999), and their perception of value in service should influence their satisfaction Thus, service employees implementation of market orientation, by fulfilling customer value, should positively influence customer satisfaction, suggesting the following hypothesis: H1 Service employees implementation of market orientation by means of customer value has a significant and positive influence on customer satisfaction Relationship between customer satisfaction and store loyalty A satisfied customer tends to become a loyal customer exhibiting repeat patronage behavior and intention (Cronin et al, 2000) Hence, customer satisfaction results in customer retention (Parasuraman et al, 1991) However, Oliver (1999) 189

3 Shu-Ching Chen and Pascale G Quester has challenged this generally accepted relationship from customer satisfaction to customer retention His work contends that the prerequisite of customer retention is customer satisfaction, but that customer satisfaction does not necessarily result in customer retention Certain mechanisms exist in, and intercept the formation of, the relationship between customer satisfaction and customer retention This includes the influences of various psychological reasons related to personal identification with business activities, and their combinative effect, such as the influence of customers affective commitment to a specific service employee, or their store loyalty Hence, understanding the key desires of customer satisfaction from the consumer perspective may control for the possible influence of those mechanisms between customer satisfaction and customer retention This can then clarify the causal relationship between customer satisfaction and customer retention In this regard, customer value should be considered for its potential to enhance customer satisfaction (eg Cronin et al, 2000) and for its contents, which is supposed to be identified by consumers A review of literature suggests that a satisfied customer does not always become a loyal customer (Oliver, 1999), contradicting previous findings The relationship between customer satisfaction and customer retention therefore, clearly remained contentious Whether customers perceived value in service providers market orientation performance has an impact on their loyalty remained to be established Hence, we state the following hypothesis: H2 Customers satisfaction with service providers performance of market orientation in relation to customer value has a significant and positive influence on retention Relationship between staff performance and store loyalty In contrast with the wide investigation of customer satisfaction and customer retention in relation to customer value, these variables are rarely examined in studies of market orientation Moreover, and to the authors knowledge, the connection between market orientation and customer retention or repeated patronage has never been explored This is despite the fact that this non-financial indicator, the source of business performance, should reveal a clear effect of market orientation on business performance Exploring the link between the value generated by staff performance and business performance deserves scrutiny, especially in the research domain of market orientation Previous studies have distinguished salesperson loyalty from store loyalty (eg Reynolds and Beatty, 1999) with salesperson loyalty believed to be an antecedent to store loyalty (eg Macintosh and Lockshin, 1997) The market orientation performance of service employees is therefore crucial to consumers loyalty to an organization Indeed, customers perceptions of employees service performance of market orientation at the time of the encounter may have a direct impact on their loyal behavior Consequently, we propose the following hypothesis: H3 Service employees performance of value delivery in market orientation practice has a significant and positive influence on customer store loyalty Methodology Research context Previous empirical studies on market orientation have been primarily conducted in a manufacturing setting However, implementing market orientation in the manufacturing industry tends to have a time-lag effect on business performance (eg Pelham and Wilson, 1996) This effect is suggested as one critical cause preventing an organization adopting market orientation from getting a better business performance (eg Greenley, 1995; Appiah-Adu, 1998) Supplying evidence beyond the conventional manufacturing industry would therefore contribute usefully to the existing literature Hence, this study examined the consequences of delivering value in a service setting The service industry presents a wide range of services, from basic to customized and lasting from a few minutes to possibly hours Those services involving the greatest interaction, namely those involving customization over a longer duration, should provide the highest potential for staff performance to influence customer retention In addition, service firms providing customers with services associated with certain or constant frequency of purchases should allow the development of meaningful customer retention measures In this study, the hairdressing sector was chosen in that the offering of this sector is primarily services, comparing with other type of service retailers (Levy and Weitz, 1998) This fits in with our primary objective of exploring customer value in a retail service context Furthermore, as hairdressing is very competitive in Taiwan, such businesses are also more likely to be very sensitive to customer needs Finally, it was important to control for other factors likely to explain business performance Consequently, we chose a specific industry (hairdressing) in one country (Taiwan) to ensure that other environmental factors were kept constant Data collection: first phase qualitative research Focus group interviews (FGI thereafter) were first organized to gain an in-depth understanding of perceived value from both views of firms and consumers Key informants came from two sources: the service employee and general customers The former mainly comprised store managers and/or senior hairdressers of sample firms Regardless of the different organizational structure among companies, they were employees with good knowledge of organizational culture and business policy due to their senior position and they exhibited good understanding of consumers due to the length of interaction with customers, ie users of the services of hairdressing salons or barbershops Unlike prior research using convenience samples such as students, this study accessed ideal informants, a more diverse sample of hairdressing consumers in Taiwan Three groups ranging in number from 8 to 11 were conducted for each type of informant This stage of qualitative research was aimed at discovering possible candidate variables for certain dimensions of market orientation, understanding the customer value state in an organization claiming market orientation, and the perceptions of customer value included in an organization s market orientation practice from the perspectives of both firms and consumers Several open-ended questions were prepared beforehand and raised in the interview The necessary steps for conducting FGI follow the guideline suggested in previous studies (eg Stewart and Shamdasani, 1990) 190

4 Shu-Ching Chen and Pascale G Quester Content analysis for qualitative data We undertook content analysis to ensure the content validity of focus group interviewing, and to identify reliable variables for developing a research instrument for the following quantitative stage (Schneider et al, 1992) Interjudge reliability, using the index Cohen s Kappa (Cohen, 1960), was assessed in two waves The first wave was undertaken after the generation of potential components of perceived value in market orientation practice from firms and customers respectively The inter-judge reliability for the data analysis of firms and consumers was high (Kappa value ¼ 0:90 and 095, respectively) Based on this reliable classification of potential components, we then identified the similarities of viewpoint on perceived value in market orientation practice shared by both parties The data validated from the first test were further classified in terms of their similar attributes A second Kappa test was thus undertaken (Kappa value ¼ 0:89) According to the general accepted reliability figure, ranging from 080 to 090, the results of our content analysis appear acceptable According to the validated components derived from both sides, similarities in perceived value were identified between both views Hence, this study empirically verified the theoretical assertion of the importance of customer value for market orientation from both perspectives of firms and consumers The results of the FGIs also suggest that customer store loyalty is the consequence of customers satisfaction with service employees performance of value delivery, based on shared views between both parties Development of research instrument The research instrument for this study was developed based on the outcome of the first qualitative stage of the study as well as relevant previous studies Two questionnaires were developed for both kinds of informants in a dyadic approach The views on perceived value common to both the firms and customers were derived from prior qualitative research and developed into questions for the questionnaires Each measure was developed for the staff performance construct in the employee questionnaire, and for the constructs of customer satisfaction and customer store loyalty in the consumer questionnaire The wording was adjusted to reflect whether employees or customers were completing the questionnaire All variables were measured using seven-point Likert-type scales anchored with 1 (Completely disagree), 4 (Neither disagree nor agree), and 7 (Completely agree) Examples of measure items are shown in the Appendix Data collection: second phase quantitative research The sample firms participating in this research stage are representatives of the hairdressing industry in Taiwan in terms of market share, annual sales volume, and business scale (the number of chained stores) as listed in Taiwan chain store almanac and public prints The hairdressing industry in Taiwan is at a mature stage and is dominated by a few large chain store retailers Among these firms, the competition is fierce and engages in very active marketing activities Also, the dissemination of information on this market is rapid The diffusion of managerial innovation in marketing among these firms is easy This results in the existence of similarity in marketing strategy and tactics among these firms such as store location, size of shop, operating hours, and price The participation of these firms ensured some homogeneity of sampling firms in this study A stratified random sampling procedure (Sekaran, 1992) was used to acquire data from informants from every sample firm The number of sample stores in every city of a particular firm was systematically defined based on the store population across the major cities For each city, random sampling was applied to select stores A total of 78 chained hair salons located in seven metropolises of Taiwan participated in the study A dyad sampling frame was designed for collecting data The term dyad or dyadic used in this research represents a matched set of service provider-customer pairs from two different populations (ie the firms and the customers) Specifically, the unit of analysis was the paired sample of a service provider and her/his customers In order to avoid any potential bias, individual service providers were first randomly selected from each of the participating stores The store managers then assisted with the random distribution of consumer questionnaires to those customers of the participating service providers Two waves of customer questionnaire distribution were required to ensure that at least 3 customer responses were secured to each participating service employee Overall, a total of 900 customer questionnaires and 218 service provider questionnaires were distributed On average, four customers for each service provider received the questionnaire This yielded a total of 191 valid matched sets Each dyad involved a complete set of one service provider with the average of two to three of his or her customers A valid response rate of 49 percent for customers and 876 percent for service providers after two rounds of questionnaire distribution was calculated Analysis methods and results Validation of research instrument The research instrument was pre-tested before undertaking the full-scale quantitative survey Sixty sample service employees and 58 sample customers were included in the pre-test and completed a self-administered questionnaire provided to them with cover letter Face validity was verified by the clearness and understandability of the research instrument by these key informants A thorough literature review and focus group interviews in the prior research stage formed the basis of content validity The test-retest method was used to examine the stability of the measures This involved administering the questionnaires twice to the pre-test sample, at no less than 2-weeks interval, in order to assess the reliability and consistency of their response According to Nunnally and Berstein (1994), memory in a later test is not affected by the former one when there are large numbers of items, as was the case here (the pre-test questionnaires contained 122 items for the employees and 100 for customers) Pearson correlation coefficient was used to assess the reliability of the scales employed and to facilitate the selection of appropriate measure items First, the items with poor test-retest reliability were identified and deleted Any measure item which a correlation significant at the level of p, 005 (2-tailed) was retained The internal consistency assessed by the Cronbach s coefficient alpha (Cronbach, 1946) also provided support for construct reliability Scale item that showed a sharp drop in the plotted pattern and a poor item- 191

5 Shu-Ching Chen and Pascale G Quester to-total correlation became candidates for elimination The purified measures then formed the final version of the questionnaires used in the final data collection On completion of data collection, a series of postfieldwork validations were undertaken Again, scale purification was implemented using Cronbach s coefficient alpha and item-to-total correlation All Cronbach s alpha values were above the 070 cut-off suggested level for scale robustness (Nunnally and Berstein, 1994) Convergent validity and discriminant validity were also examined For convergent validity, correlation analysis was undertaken to investigate the relationship between every two components of the same construct This showed that each component of each construct was highly correlated to any other component of the same construct ( p, 001) Furthermore, measures that were shared between the two different types of respondents were compared and found to be highly correlated also ( p, 005) Discriminant validity was examined by comparing the correlations between variable components theoretically believed to be unrelated Only a small percent of these relationships (about 27 percent) showed a correlation significant at p, 005 and these were all lower than 03 As a result, both convergent and discriminant validity was deemed supported Further reliability and validity assessments at the pre-test and post-fieldwork stages provided additional support for the robustness of our measure items Dyadic analysis approach for quantitative data In light of the dyadic data collection, we used a matcheddyad analysis approach (Deshpandé et al, 1993) Data from the firms and the customers were not analyzed separately but jointly In order to form a matched dyad for subsequent statistical analysis, the data from overall customers under each sample service providers was first integrated The way to integrate customer data was by averaging the scale scores gained from a service provider s customers, for each variable, to fit the requirement of a single pair calculation (Hartline et al, 2000) After data processing, a sample service provider was combined with the synthesis of her/his customers produced by integrating customer data A matched dyad including one service provider and the aggregate of his/her customers (the synthesis ) was thus formed This is similar to other research using dyadic sampling frame in a similar fashion (eg Hartline et al, 2000) Structural equation modeling for model building Following the two-stage modeling approach suggested by Anderson and Gerbing (1988), a latent variable path analysis was undertaken Convergent validity was assessed for the measurement model fit regarding the assignment of indicators to each construct This validity is suggested by loadings and the overall fit produced by confirmatory factor analysis using AMOS version 40 (Arbuckle, 1999) The purified scale items tested by Cronbach s alpha after post-fieldwork were used in the analysis The deletion of certain components on the basis of AMOS diagnostics increased the fit to a better level The modification index generated from the covariance analysis of residuals suggested the candidates for deletion As shown in Table I, the loading between the observed variable and latent variable for each construct ranged from 080 to 095 and all exceeded the acceptable limit of 050 (Steenkamp and van Trijp, 1991) Moreover, the fit statistics of each measurement model (one-dimensional model) indicated a reasonable level of fit All these demonstrated adequate convergent validity for all three constructs in the model A further examination of the measurement model fit was undertaken by assessing the composite reliability and variance extracted As presented in Table I, both the measures of composite reliability and variance extracted exceeded the acceptable level of 050 All composite reliabilities for each construct were above 090, which demonstrated the internal consistency of each latent construct The average variance extracted for each construct ranged from 084 to 093, indicating the representative nature of the indicators for the latent construct Moreover, the validity of the measurement model can also be examined from the variance extracted for each construct Evidence of discriminant validity exists when the average variance extracted for each construct is beyond the threshold level of 050 The reliability and validity of each construct in the model are therefore evident The above tests provided a solid base for model building Latent variable path analysis model After validating the constructs on the basis of the proposed conceptual model, a full latent variable path analysis model (Bentler, 1980) was built This model was appraised with the full consideration of the underlying theory All constructs verified for reliability and validity were included in the full latent variable model The structural model fit was undertaken by examining the overall fit indices, the significance of estimated coefficients, the t-value and R 2 computed by the AMOS maximum-likelihood method This provided a comprehensive way to assess our model As can be seen in Figure 1 and Table II, the resulting full model exhibits an excellent fit The loading coefficients between some major constructs were adequate and in the expected direction The standardized estimates and t-values supported the significance of the structural paths between staff performance and customer satisfaction (SP-CS), customer satisfaction and customer store loyalty (CS-CR), but did not support that of staff performance and customer store loyalty (SP-CR) (see Table II) The significance of estimated coefficients, t-value and R 2 demonstrated the strength of structural paths of SP-CS and CS-CR In addition, the standardized coefficients of two variables in a model were all less than 08, which suggests that there are no concerns about multicollinearity The structural fit of the model is evident, demonstrating its robustness In addition, Figure 1 shows the final indicators representing each latent variable in the model for the specific research context The measure items of each indicator are given in the Appendix Discussion Table II presents the standardized path coefficients and their t-values between any two variables in the model Research outcomes indicate that the hypothesized relationships of the effect of staff performance on customer satisfaction (H1), and that of customer satisfaction on customer store loyalty (H2) are supported with statistical significant results in the expected direction However, the results do not support the relationship between staff performance and customer store loyalty (H3) These findings are discussed below 192

6 Shu-Ching Chen and Pascale G Quester Table I Composite reliability and variance extracted measures Components Composite reliability Variance extracted Standardized loading Staff performance Individualized value 095 Economic value 092 Social-psychological interaction 088 Customer satisfaction Individualized value 095 Economic value 093 Social-psychological interaction 085 Customer store loyalty Revisit intention 080 Consumption frequency 080 Consumption expenditure 084 Recommendation intention 092 Figure 1 Customer store loyalty model for retail service Table II Structural parameter estimates: latent variable path analysis model (n ¼ 191) Structural path Hypothesis Standardized coefficient t-value R 2 Staff performance! customer satisfaction H1 (þ) *** 0375 Customer satisfaction! customer store loyalty H2 (þ) *** 0206 Staff performance! customer store loyalty H3 (þ) x :211, p 5 0:718 GFI 5 0:952 AGFI 5 0:908 RMSEA 5 0:000 CFI 5 1:000 PNFI 5 0:626 Note: *** p,

7 Shu-Ching Chen and Pascale G Quester Relationships between staff performance and customer satisfaction Empirical support was found for the relationship between service employees efforts to deliver value in market orientation practice (staff performance) and customer satisfaction, as hypothesized by H1 The employees service performance was significantly and positively related to customer satisfaction (H1:g 1 ¼ 0:613, p, 0:001), indicating that service employee efforts to deliver individualized value and economic value and to provide social-psychological interaction highly satisfied customers This finding extends our understanding of the relationship between customer value and customer satisfaction in relation to market orientation, where such causality had not been fully explored The result suggests that providing customer value in market orientation practice positively influences customer satisfaction in the case of hairdressing services This makes a further contribution to studies of both market orientation and customer value For example, service employees efforts to deliver individualized value by providing extra service to cater for customers pleasure significantly influenced customers satisfaction Also, the results indicated that employees performance in delivering some types of customer value in market orientation practice during the moments of truth (Carlzon, 1987) significantly influences customers overall satisfaction Several effective strategies to satisfy customers from the employee perspective were revealed from the components of the staff performance construct For example, convenience (individualized value), payment equity for service contents (economic value) and incentives of relationship establishment (social-psychological interaction) contributed effectively to staff performance Relationships between customer satisfaction and customer store loyalty Our results indicate that customers satisfaction with service providers efforts in relation to market orientation has a significant and positive impact on retention (H2:g 2 ¼ 0:549, p, 0:001) Specifically, customer store loyalty results from satisfaction with service employees efforts in delivering individualized value, economic value, and taking into account their need for social-psychological interaction In effect, customer retention is reflected by their store loyal behavior, namely, revisit intention, consumption frequency, consumption expenditure and recommendation intention This result identifies several value-adding business activities, which are effective in satisfying customer, and in turn, achieving customer store loyalty According to Oliver (1999), certain mechanisms exist in, and intercept the formation of, the relationship between customer satisfaction and customer retention Thus, researchers should take the possible obstacles into account when aiming for customer retention such as personal determinism and social bonding as suggested by Oliver (1999) In response to this, our empirical study suggests that involving several dimensions of customer value, including intrinsic and extrinsic ones, can effectively strengthen the link between customer satisfaction and customer retention Based on service employees application of different kinds of customer value in market orientation practice, the effect of customers perceptions of employees service performance on customer satisfaction is positive This provides practical guidance on what to do to satisfy customers, which can lead to customer store loyalty For example, fulfilling customers needs for socialpsychological interaction by recognizing and greeting them by name whenever they visit the store may result in customer store loyalty This significant relationship between customer satisfaction and customer store loyalty provides empirical evidence of the critical role service employees play in the relationship between market orientation and business performance In this study, for example, business performance in the form of increase customers consumption expenditures resulted from employees efforts to fulfill customer satisfaction Thus, it is evident that customers perceptions of, and satisfaction with, employees service performance have an impact on their retention, as suggested in previous studies (eg Parasuraman et al, 1991) The non-financial index of customer store loyalty used in the study provides an evaluation of business performance from the consumer perspective Such indices also provide a warning of customer loss as well as a convincing proof of customer gain for firms It is signified by customers store loyal behavior of revisit intention, consumption frequency, consumption expenditure, and recommendation intention The above discussion of H2 provides an insight into customer store loyalty, particularly the best approach to it Our results suggest that service employees should stress certain essential satisfaction factors, derived from customers view on satisfaction, in their service efforts According to our results, these essential factors of customer satisfaction lead to customer store loyalty Service employees who include these essential factors in their efforts to satisfy customers can effectively retain customers This further enhances our understanding of the impact of customers perceptions of staff performance on customer satisfaction, and in turn, on customer store loyalty Relationship between staff performance and customer store loyalty The effect of service employees implementation of market orientation (staff performance) on customer retention was not significant (H3:g 3 ¼ 20200, ns), questioning the causal sequence between staff performance and customer store loyalty This result was unexpected Not only was the relationship non significant, but the coefficient indicates that the relationship could be in the opposite direction Although non-significant, this result may suggest that the loyalty of customer could well act as reinforcement for service providers, encouraging them to improve their service delivery and to align the value they deliver to their customers expectations Examining jointly this unsupported relationship with the preceding ones (ie H3 vs H1 and H2) suggests that customer satisfaction is the antecedent of customer store loyalty, consistent with studies of customer satisfaction and/or customer retention (eg Oliver, 1999) The model also demonstrates that the influence of staff performance upon customer store loyalty is indirect Though staff performance can make a direct contribution to customer satisfaction (R 2 ¼ 0375, see Table II), the way to customer store loyalty from staff performance is via customer satisfaction This offers some insights into the effects of employees efforts in terms of market orientation and may suggest additional avenues to retain customers 194

8 Conclusions Modeling store loyalty Shu-Ching Chen and Pascale G Quester A valid customer store loyalty model was presented in this study This model provides a valuable insight into the effect of perceived value in market orientation practice on service firms business performance Significantly, an emphasis placed on the interaction between service employees and their customers differentiated this study from previous ones As most previous studies in market orientation center on the relationship between an organization and its employees, a focus on this external interface provided a much-needed understanding of the effects of implementing market orientation A clear causal relationship among the key variables discussed in this study was established The validated model provides new insight into the direct and indirect effect of market orientation on business performance from two standpoints of front-line employees and customers Namely, from the employee perspective, implementing market orientation can result in customer store loyalty through customer satisfaction From the consumer perspective, customer satisfaction directly leads to customer store loyalty By providing empirical evidence of the indirect and direct links between market orientation and customer store loyalty at two levels of employees and customers, this study contributes significantly to the research domain of market orientation This study provided an insight into the moments of truth as experienced by both service providers and their customers The evidence indicated appropriate ways to enhance employees service performance and satisfy customers All are critical to a successful business Most importantly, avenues for customer loyalty were revealed The study showed that customer satisfaction is the prerequisite of customer store loyalty The role of customer satisfaction in the implementation of a value-based market orientation for generating customer loyalty was emphasized In addition, by using non-financial performance indices of customer store loyalty to examine the market orientationperformance relationship, this study provided a different view on the effect of market orientation on business performance The workforce contribution to an organization s business performance, such as service employees efforts to satisfy and retain customers, could then be appropriately measured These non-financial performance indices supplement the traditional financial indices used for the manufacturing industry in past studies Moreover, based on customers satisfaction with employees service performance, the nonfinancial or performance index of customer store loyalty was better suited to capture the comprehensive nature and total effect of market orientation An organization s business performance can thus better be predicted In addition, the time lag effects identified by researchers as one critical cause of ineffective market orientation were reduced Management implications Our model also provides useful guidelines for implementing a value-based market orientation From the perceptions of both employees and customers on market orientation, the model clearly presents effective ways to guide employees market orientation efforts in relation to customer value Practical ways to achieve customer store loyalty at the management level, employee level, and customer level were indicated Insights drawn from this study therefore benefit marketing practitioners and service providers seeking to effectively implement market orientation and improve business performance (via customer store loyalty) This study suggests ways to retain customers by means of emphasizing shared views on value by both parties and delivering it effectively The superior customer value identified in the study has various practical applications (see Table I and Appendix) Based on the shared views of both employees and customers on value delivery in market orientation, this study provides the way to leverage such superior customer value in the pursuit of customer satisfaction and, consequently, customer store loyalty Management can use such superior customer value for cultivating a value-based market orientation culture within the organization, and for judging service employees market orientation performance Moreover, service employees can use the contents of such superior customer value to satisfy and/or further retain customers, as well as to detect blind spots about their service behaviors to improve their service performance By demonstrating the positive outcome of defining value from the customer s perspective, our study should therefore encourage service marketers more generally to focus their training and staff development in such a way as to reflect the dimensions reported by service customers as important for their perception of value Hence, a management system can be developed to reflect the value perception of customers, by providing incentives or promotion to service providers based on how closely and effectively they adapt their service delivery performance to the preferences of their individual customers Study limitations and future research This study confirmed the theoretical assertion of the importance of customer value for market orientation Significantly, our empirical model indicates that service providers should attempt to manage customer satisfaction and perceptions of value in the implementation of market orientation as they are directly related to customer store loyalty However, the results of this study are based on crosssectional observations with samples from firms and consumers in Taiwan, and generalizations about other populations would be premature A cross-population investigation of the issues addressed in the study may produce other insights about perceived customer value in market orientation practice These empirical results are also valid for a specific context the service-dominated industry of retailing Nevertheless, according to the service classifications proposed by Lovelock (1983), our results may also apply to other service industries sharing some characteristics such as health care, beauty salons, restaurants, passenger transportation and exercise clinics Managers in other industries should therefore employ the reported contents with caution A replication of our study in different industries should reveal whether the model is generalizable to other retail settings In addition, the firms participating in the study were mainly from chain-store retailers A study including independent retailers and chain store ones would provide a valuable insight into the degree of market orientation adopted by different business types in retailing Finally, researchers may find it interesting to use the three dimensions of customer value identified in our store loyalty model (ie Individualized value, Economic value, and Socialpsychological interaction) as antecedents to business 195

9 performance Such an examination should enhance our understanding of the effect of superior customer value on both parties, as well as customer retention This would further contribute to establishing the importance of market orientation implementation, by means of customer value, for an organization s business performance References Modeling store loyalty Shu-Ching Chen and Pascale G Quester Anderson, JC and Gerbing, DW (1988), Structural equation modelling in practice: a review and recommended two-step approach, Psychological Bulletin, Vol 103, pp Appiah-Adu, K (1998), Market orientation and performance: empirical tests in a transition economy, Journal of Strategic Marketing, Vol 6, pp Arbuckle, JL (1999), Amos Users Guide Version 40, Small Waters Corporation, Chicago, IL Bentler, PM (1980), Multivariate analysis with latent variables: causal modelling, Annual Review of Psychology, Vol 31, pp Carlzon, J (1987), Moments of Truth, Bollinger, New York, NY Cohen, J (1960), A coefficient 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