2.0: Literature Review 2.1: Conceptualization of the WOM Construct 1

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1 1.0: Introduction Harrison-Walker (2001, p.63) defines Word of Mouth (WOM) as an informal, person-toperson communication between a perceived non-commercial communicator and a receiver regarding a brand, a product, an organization or a service. Boulding, Kalra, Staelin and Zeithaml (1993) assert that the WOM communication about a firm is a behaviour exhibited by the consumer that may affect the strategic health of the firm. This assertion by Boulding et al. (1993) is consistent with multiple consumer research studies which suggest that WOM is a major influence on the consumers buying decision process for both products and services and generates more than 3.3 billion brand impressions each day in USA alone (Brown & Reingen, 1987; Keller & Libai, 2009). A possible explanation for this is that consumer s value WOM as a tool to reduce the risk associated with purchases, particularly in the case of services (Ennew, Banerjee & Li, 2000; Murray, 1991; Roselius, 1971). This study focuses on offline WOM behaviour as it has received limited research attention from the academic community in the recent years compared to e-wom, even though empirical evidence suggests that majority of all WOM conversations transpire offline either face-to-face or over the phone (Keller & Libai, 2009; Libai et al., 2010). Moreover, Libai et al. (2010) assert that offline WOM behaviour may influence consumption decisions of individuals much more than e-wom. Furthermore, little research has examined the effect of WOM on the person imparting it: the WOM sender; hence this paper examines the antecedent and consequence of offline WOM behaviour from the sender s perspective, in one theoretical framework. The next section discusses the literature review conducted for this study. 2.0: Literature Review 2.1: Conceptualization of the WOM Construct WOM is an informal communication which lacks commercial bias and can be exchanged between two individuals or within a group (Bone, 1992; Brown, Barry, Dacin & Gunst, 2005; East, Hammond & Wright, 2007; Harrison-Walker, 2001). In addition, WOM can take the shape of third party WOM, as overheard conversations involving a passive recipient of information who is neither a sender nor a direct receiver of the WOM information (Burzynski & Bayer, 1977; Gremler & Brown, 1999). The valence of this WOM communication can be (a) positive, possibly encouraging brand choice; (b) negative, possibly discouraging brand choice or (c) neutral, having no influence on the consumer purchase decisions (Anderson, 1998; East, Hammond & Lomax, 2008; Mazzarol, Sweeney & Soutar, 2007; Naylor & Kleiser, 2000; Wang, 2011). Sweeney, Soutar and Mazzarol (2008) assert that positive Word of Mouth (PWOM) is more cognitive, whilst negative Word of Mouth (NWOM) is more emotional in nature. Furthermore, the exchange of WOM information between individuals or within groups can be an output from the sender as a consequence of post purchase process (Soderlund, 1998) and an input for the receiver as part of the pre-purchase buying process (East et al., 2007). In the extant literature, WOM is conceptualized in three different ways: (a) as a discussion (Harrison-Walker, 2001; Soderlund & Rosengren, 2007); (b) as an explicit recommendation (Athanassopoulos, Gounaris & Stathakopoulos, 2001; Garnefeld, Helm & Eggert, 2011; Gremler & Brown, 1999; Hartline & Jones, 1996; Hennig-Thurau,Gwinner & Gremler, 2002) and (c) by incorporating both a discussion and an explicit recommendation (Brady, Voorhees & Brusco, 2012; Brown et al., 2005; Naylor & Kleiser, 2000). 1 P a g e

2 Furthermore, there is a debate amongst academics with regards to whether the WOM construct is part of the wider loyalty construct or not. In the reviewed literature two views emerged on the relationship between the WOM and the loyalty constructs. The dominant view in the literature conceptualizes WOM as a distinct construct from loyalty (Brown et al., 2005). Alternatively, WOM is viewed as part of the wider loyalty construct (Bloemer, Ruyter & Wetzels, 1999). However, Soderlund (2006) empirically demonstrates that better results are obtained when loyalty and WOM are modelled as two separate constructs as opposed to one single construct. Review of the extant literature suggests that WOM can be studied by adopting either an individualistic or a network approach. An individualistic approach is considered more appropriate when the aim of the study is to examine the antecedents of WOM (Harrison- Walker, 2001). Alternatively, the network approach which explicitly recognises the relationships that link members of a social system (Bristor, 1990 as cited in Bansal & Voyer, 2000, p. 167) is considered more appropriate for studying the consequences of WOM, as these studies are likely to involve a sender-receiver dyad where the WOM participants will be in some sort of social relations (e.g. friends or acquaintances) (Brown & Reingen, 1987). 2.2: Antecedents of WOM In the literature, identification (Brown et al., 2005), service quality (Bloemer et al., 1999; Harrison-Walker, 2001), trust (Ranaweera & Prabhu, 2003), service loyalty (Gremler & Brown, 1999), perceived value (Hartline & Jones, 1996; McKee, Simmers & Licata, 2006), employee behaviour (Gremler, Gwinner & Brown, 2001), services sweethearting (Brady et al., 2012) and service encounters (Maxham, 2001 ; Swanson & Kelley, 2001) are some of the investigated antecedents of WOM. In addition, customer satisfaction (CS) is examined as a key antecedent of the WOM communication. There are numerous studies examining CS as an antecedent of WOM. Anderson (1998); Athanassopoulos et al. (2001); Bone (1992); Brown et al. (2005); Mangold, Miller and Brockway (1999); Soderlund (1998); Wangenheim and Bayon (2007) provide empirical evidence of a significant positive influence of CS on WOM. On the other hand, scholars like Arnett, German and Hunt (2003); Bettencourt (1997); Reynolds and Beatty (1999) do not find any evidence of a direct relationship between CS and WOM. Given that results from prior research on the CS-WOM link have been equivocal, research on CS- WOM link merits further investigation as CS is an important variable that is likely to trigger WOM. Therefore, in this study CS is examined as an antecedent of WOM. An under-researched area identified in the literature pertains to the moderating effects on the CS-WOM link. Two recent studies which examine the moderating effects on CS-WOM link are: (a) Wangenheim and Bayon s (2007) study which suggests that CS-WOM link is moderated by several customer involvement dimensions and (b) Brown et al. s. (2005) study which suggests that commitment moderates the effect of CS on WOM. However, Brown et al. (2005) conceptualized commitment as a uni-dimensional construct. Commitment can be conceptualized as a multi-dimensional construct with (a) affective and (b) continuance commitment as its components (Fullerton, 2003; Harrison-Walker, 2001). Affective commitment is related to a customer s identification and a positive psychological attachment with the service firm and is a strong driver of WOM (Fullerton, 2003; Garnefeld et al., 2011). On the other hand, continuance commitment represents the rational element and has its roots in Becker s (1960 as cited in Fullerton, 2005, p.1375) theory of side bets. 2 P a g e

3 Continuance commitment pertains to the extent that the customer feels bound or locked in to the service provider due to scarcity of alternatives, risks and switching costs associated with discontinuing the relationship with the service provider (Fullerton, 2003; Fullerton, 2005; Harrison-Walker, 2001; Matos & Rossi, 2008). Prior research suggests that customers feeling locked in with a service provider may respond by withdrawing PWOM (Fullerton, 2003). In this research continuance commitment is examined as a moderator of the CS-PWOM link. We expect that CS and continuance commitment will interact in predicting PWOM behaviour of the customers. 2.3: Consequences of WOM Evidence from empirical studies suggests that WOM can impact: (a) WOM receiver s attitude towards the service firm (Soderlund & Rosengren, 2007); (b) new customer acquisition (Wangenheim & Bayon, 2007); (c) brand choice (East et al., 2008) and (d) WOM sender s loyalty (Garnefeld et al., 2011). Moreover, loss to the firm that neglects NWOM has been acknowledged (Richins, 1983). A key finding of the reviewed literature pertains to the PWOM-loyalty link. Garnefeld et al. (2011) empirically demonstrates that recommending a service provider influences the WOM senders attitudinal and behavioural loyalty towards the service provider. This finding suggests that WOM sender s loyalty is not only an antecedent of offline WOM (Gremler & Brown, 1999; Sichtmann, 2007) but is also a consequence of offline WOM (Garnefeld et al., 2011). In this study, WOM sender s service loyalty is examined as a consequence of sender s PWOM. Given that WOM is a social phenomenon, properties of social relations play a crucial role in understanding WOM behaviour (Brown & Reingen, 1987). Two themes emerged from the extant literature which pertains to the properties of social relations such as tie strength i.e. intensity of social relations between the sender and the receiver and homophily (Brown & Reingen, 1987). Homophily is the degree to which pairs of individuals are similar in terms of certain attributes such as age (Brown & Reingen, 1987, p. 354). Tie strength between the sender and the receiver can be strong i.e. primary family members or weak i.e. acquaintances (Granovetter, 1973). Brown and Reingen s (1987) study examined the impact of tie strength and homophily on PWOM and its subsequent impact on services selection. The study confirms that strong ties are more likely than weak ties to be activated for the WOM information when both are available as potential sources of information to make services selection. Moreover, the results confirmed that the information from a strong tie source is perceived as more influential than information obtained from a weak tie source in the receivers decision making (Bansal & Voyer, 2000; Brown & Reingen, 1987). Moreover, Wangenheim and Bayon (2004; 2007) found that the degree of homophily between the WOM participants can influence the strength of WOM on the WOM recipient s service switching decision. Finally, Bansal and Voyer (2000) suggests that the greater the tie strength between the sender and the receiver more actively the WOM information is sought and attained. Furthermore, actively sought WOM has more effect on the WOM receiver s purchase decision than passively attained WOM (Bansal & Voyer, 2000; East, Hammond, Lomax & Robinson, 2005; Sweeney et al., 2008). Extant studies have examined the effect of tie strength, homophily and WOM sought/volunteered only on the WOM receiver, not the sender. Therefore, this study aims to address this research gap by examining the interactive 3 P a g e

4 effect of tie strength, homophily and WOM sought/volunteered on the WOM sender. The next section presents the theoretical framework of this study. 3.0: Theoretical Framework Figure 1 represents the theoretical framework of this research study. This study integrates both the antecedent and consequence of PWOM in one theoretical framework. CS is examined as an antecedent of PWOM behaviour and the CS-PWOM link is moderated by continuance commitment. The consequence component of the theoretical framework examines WOM sender s service loyalty as a consequence of articulation of PWOM by the sender. Tie strength, WOM actively sought/volunteered and the degree of homophily between the WOM participants moderate the PWOM- service loyalty link. Figure 1: Theoretical Framework Continuance Commitment Tie Strength Homophily WOM Actively Sought/Volunteered Customer Satisfaction Sender s PWOM Behaviour WOM Sender s Service Loyalty In this study, WOM is conceptualized as PWOM, an explicit recommendation and distinct from the loyalty construct. Service loyalty is conceptualized as per Gremler and Brown s (1996) work incorporating attitudinal, behavioural and cognitive dimensions. Customer satisfaction is conceptualized as cumulative satisfaction with the service provider. Cumulative customer satisfaction is an overall evaluation based on the total purchase and consumption experience with a good or service over time (Anderson, Fornell & Lehmann, 1994, p.54). It is argued that cumulative customer satisfaction can better predict customer intentions and behaviour (Han, Kwortnik & Wang, 2008; Olsen & Johnson, 2003). 3.1: Research Aim, Research Objectives and Research Hypotheses The aim of this research is to examine the chain relationship/effects from WOM sender s satisfaction to WOM sender s service loyalty via PWOM. Thus, the research objectives of this study are multi-fold: (a) to examine CS as an antecedent of PWOM (b) to examine service loyalty as a consequence of PWOM and (c) to investigate the moderating effects of (a) continuance commitment on the CS-PWOM link and (b) WOM actively sought/volunteered, tie strength and homophily on the PWOM-service loyalty link. Specifically, the research hypotheses of the study are as follows: Hypotheses 1: CS is positively related to positive WOM behaviour Hypotheses 2: The CS-PWOM link is stronger for customers with low continuance commitment than high continuance commitment Hypotheses 3: Articulating positive WOM has a positive effect on sender s service loyalty Hypotheses 4: The effect of articulated positive WOM on the sender s service loyalty is stronger when the degree of homophily between the WOM sender and the WOM receiver is high than low Hypotheses 5: The effect of articulated positive WOM on the sender s service loyalty is stronger when the tie strength between the WOM sender and the WOM receiver is strong than weak 4 P a g e

5 Hypotheses 6: The effect of articulated positive WOM on the sender s service loyalty is stronger when the WOM is volunteered by the WOM sender than when WOM is actively sought by the receiver 4.0: Proposed Methodology and Measures This research is based on the research paradigm of positivism (Blaikie, 2007; Bryman & Bell, 2011). The study proposes to adopt an experimental research design. Experiments are considered an appropriate research design for studies examining WOM as it is difficult to study offline WOM as it occurs (East, Lomax & Narain, 2001). The detailed research design of this study is still work in progress. This study measures WOM behaviour and not WOM intentions as in the reviewed literature a strong case is made to measure WOM as an actual behaviour. This is because empirical findings suggest that intentions are at best imperfect representations of actual behaviour and that respondents often do not convert their intentions into behaviour (Mittal & Kamakura, 2001; Romaniuk, Nguyen & East, 2011). All the constructs in the theoretical framework will be measured using previously employed multiple-item scales from the marketing literature. WOM will be measured by adopting the Harrison-Walker s (2001) scale developed from the WOM sender s perspective. Harrison-Walker (2001) conceptualized WOM as a two construct model i.e. WOM Activity and WOM Praise. Four items will be used to measure WOM Activity and two items will be used to measure WOM Praise. Four items will be used to measure continuance commitment employed by Fullerton (2003). Five items will be used to measure CS, as employed by Han et al. (2008). Service loyalty measures will be adopted from Jones and Taylor s (2007) study. Tie strength measures will be adopted from the work of Frenzen and Davis (1990). Two items will be used to measure homophily from the work of Wangenheim and Bayon (2007). Finally, WOM actively sought/volunteered will be measured as per the two statements developed by Bansal and Voyer (2000). 5.0: Contribution to Theory and Practice This research is important for multiple reasons. First, whilst studies exists which focus on the CS-PWOM link (Anderson, 1998; Brown et al., 2005) and sender s WOM loyalty link (Garnefeld et al., 2011), no empirical research to date has examined the entire process from CS to WOM sender s service loyalty via PWOM from the WOM sender s perspective. Second, it is expected that this study will enrich our understanding of WOM behaviour by examining the interaction effect of tie strength, homophily and WOM actively sought/volunteered on the service loyalty of the WOM sender. Consideration of these moderators is important because properties of social relations play a crucial role in understanding WOM behaviour (Brown & Reingen, 1987). Prior research has examined the effect of the incorporated moderators only on the WOM receiver, not the sender, when it can be argued that these moderators may also impact the WOM sender (Bansal & Voyer, 2000; Brown & Reingen, 1987). Third, this research aims to expand our current understanding of the CS-PWOM relationship by examining continuance commitment as a moderator of the CS-PWOM link. This has implications also for the marketing practice, given that organisations focus on CS as a means to retain existing customers (Arnett et al., 2003); therefore practitioners would benefit from insights into the satisfaction-pwom-loyalty chain of an existing customer i.e. the WOM sender. We expect that the findings of this research will indicate that PWOM is not only important for customer acquisition (Wangenheim & Bayon, 2007) but also for customer retention. 5 P a g e

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