A Conceptual Framework to Manage e-loyalty in Business-to-Consumer e-commerce ABSTRACT Jamie Carlson IBM Global Services, Australia Suku Sinnappan University Technology Sydney, Australia Anton Kriz University of Newcastle, Australia The issue of assessing customer perceptions of e-service quality performance and its impact on e- loyalty, has emerged as an area of strategic importance for e-marketers and Website managers. This paper proposes a conceptual framework of the key determinants a manager must consider to develop e-loyalty in business-to-consumer e-commerce. It is argued that the quality of a Website can contribute to strengthening loyalty outcomes that ultimately enhance consumer relationships. Furthermore, it is proposed that Internet expertise of the user moderates the impact on the system of relationships. Resultant research propositions are explored, with managerial implications and future research areas discussed. Keywords: e-service Quality, Customer Satisfaction, e-loyalty, Conceptual Framework INTRODUCTION Internet technology has dramatically increased the ability of firms to serve and develop intimate relationships with their customers. On the Web, brand building and customer retention has become of particular significance as a result of the interactive interface, the growing number of competitive choices and cost savings associated with repeat purchases and customer acquisition. More specifically, managing the relationship between perceived e-service quality to develop e-loyalty has become a strategic issue for organisations participating in business-to-consumer (B2C) e-commerce. It is well established in the traditional marketing literature that a Quality-Satisfaction-Loyalty chain of effects relationship exists, and that improvements in service quality lead to increases in favourable behavioural intentions and decreases in unfavourable service intentions (Cronin et al. 2000). However, confusion still surrounds the conceptualisation and measurement of e-service quality, and its effects on consumer behaviour. Specifically, little is known about the joint relationships between perceived e- service quality, satisfaction and e-loyalty for effective customer relationship management (CRM). Managers need to gain a better understanding of these relationships to allocate e-marketing efforts between satisfaction initiatives and loyalty programs (Shankar et al. 2002). Furthermore, the ability for developing successful customer relationships lies in an organization s ability to understand its customers and their individual preferences, expectations and changing needs. The infusion of technology into the service encounter has been dramatically changing the nature of customer relationships and interactions. Managers are now concerned about how to assess the relationship between e-service quality and e-loyalty, and what underlying dimensions of a Website can influence this relationship. This research attempts to provide e-marketers and Website managers with a conceptual framework to assess and manage customer perceptions of the determinants of e-loyalty in B2C e-commerce. As such, this paper is structured in four key sections. First, a conceptual model for managers is presented of the key constructs to consider in assessing and managing e-loyalty. The second section is devoted to a review of relevant literature examining these constructs of interest. Third, some managerial implications and concluding remarks are presented. Finally, limitations and future research directions are identified and discussed. 1
CONCEPTUAL FRAMEWORK: THEORY AND PROPOSITIONS Figure 1 presents the proposed conceptual framework illustrating the effects of e-service quality on satisfaction, and e-loyalty in B2C e-commerce. The framework proposes that the quality dimensions of a Website can drive the level of customer satisfaction, which can translate into positive e-loyalty consequences. Furthermore, it is proposed that the level of a user s expertise in using the Internet will moderate the relationships among the dimensions of e-service quality, satisfaction and e-loyalty. The following section will now discuss the factors of interest within the proposed model. Figure 1 - A Proposed Model for Managing e-loyalty in Business-to-Consumer Internet Commerce Dimensions of e-service Quality Internet Expertise (IE) Usefulness Entertainment Information Fit-to-task Satisfaction (es) Loyalty (el) Complementary Relationship Conceptualising e-service Quality e-service quality plays a fundamental role in improving satisfaction and retention through the Web (Zeithaml et al. 2002). It is particularly important for e-business since acquiring customers is expensive. One study has revealed that the average customer must shop four times at an online store before he or she generates a profit for the retailer (Mainspring and Bain & Company, 2000). Consequently, strategies that facilitate quality provision can influence the loyalty process. Although limited empirical studies exist in measuring the effects of e-service quality, research is beginning to emerge. Notable research by Wolfinbarger and Gilly (2003) employed a four-dimension measure of e- Service quality and found that the drivers of Website design to be; Fulfilment/reliability, Privacy/security and Customer service were strongly predictive of satisfaction, attitudes toward the Website and behavioural intentions. Alternatively, WebQual (Loiacono et al. 2002) has emerged into the academic literature as a reliable and rigorous instrument to operationalism and assess e-service quality. Theoretically grounded in established models such as the Technology Acceptance Model (TAM) and the Theory of Reasoned Action (TRA), the WebQual instrument consists of 12 core dimensions: informational fit-to-task; tailored communications; trust; response time; ease of understanding; intuitive operations; visual appeal; innovativeness; flow/emotional appeal; consistent image; ability to complete business online and relative advantage (over using traditional channels). These 12 dimensions further collapse into 4 second order latent constructs: (1) Usefulness, (2) Ease of use, (3) Entertainment, and (4) Complementary relationship. 2
Figure 2 WebQual Constructs and Individual Dimensions WebQual Second Order Constructs Usefulness Ease-of-use Entertainment Complimentary relationship Dimensions Informational fit-to-task Interactivity Trust Response time Ease of understanding Intuitive operations Visual Appeal innovativeness Flow/emotional appeal Consistent image Online completeness Better than alternative channels The Relationship Between e-service Quality and Customer Satisfaction Customer satisfaction in all aspects of business has been a primary topic of business concern in recent years. Satisfaction can be considered as a post evaluation of consumers experience with the service, and is captured as a positive feeling, indifference, or negative feeling (Anderson et al. 1994). Limited studies exist in examining satisfaction in the e-commerce environment, however, the available research suggests that dimensions of e-service quality are strongly predictive of customer satisfaction. Previous studies by Wolfinbarger and Gilly (2003), Xue and Harker (2002) and Szymanski and Hise (2000) found that Website design plays a prominent role in developing positive customer satisfaction. The Relationship Between Customer Satisfaction and e-loyalty Loyalty can be conceptualised as comprising of two components: attitudinal commitment (a consumer s positive affirmation regarding a product or firm) and behavioural commitment (actual intentions to repeat purchase) (Dick and Basu 1994). Increasing customer loyalty is a method of increasing the inelasticity of demand with brand loyal customers who are generally less sensitive to price increases because they value the benefits of the brand. As a result of an ever-increasing number of Websites available on the Web, new e-business models must consider the value of favorable consumer attitudes and repeat patronage to the Website. Reichheld and Schefter (2000) contend that technology alone will not create loyalty but through delivering a consistently superior customer experience. Previous Web-based research has found that a more satisfied consumer will form positive attitudes towards the Website, is more likely to revisit a Website, purchase from the Website in the future, talk about the Website with others and recommend the Website to those seeking advise (Wolfinbarger and Gilly, 2001; Chen and Wells, 1999; Loiacono et al. 2002). Moderating Effect of Internet Expertise According to information systems researchers, technology experience is a strong predictor of attitudes and behaviour towards the technology. In the e-marketing field, previous studies consider the level of a user s expertise, as an important factor since experts can possess different search and browsing habits. Novak et al. (2000) found that the way individuals use the Web as well as their level of expertise and skill influences their satisfaction with the Website. Similarly, Bruner and Kumar (2000) found that when a consumer s level of expertise with the Internet increases, attitudes towards the Website tended to be more favourable. Therefore, we argue that the level of Internet expertise will moderate the relationship between perceived e-service quality and satisfaction, and e-service quality and loyalty intentions. 3
CONCEPTUAL FRAMEWORK AND PROPOSITIONS Figure 3 presents the proposed conceptual framework illustrating the effects of e-service quality on satisfaction, and e-loyalty in B2C e-commerce. The propositions states that the quality dimensions of a Website can drive the level of customer satisfaction, which can translate into positive e-loyalty consequences. Furthermore, it is proposed that the level of a user s expertise in using the Internet will moderate the relationships among the dimensions of e-service quality, satisfaction and e-loyalty. Thus, we propose the following propositions: P1: The e-service quality dimensions of Usefulness, Entertainment, Information Fit-to-task and Complementary Relationship have a direct positive relationship to satisfaction P2: Satisfaction mediates the relationship between dimensions of e-service quality and e-loyalty P3a: Internet expertise will moderate the relationship between dimensions of e-service quality and satisfaction P3b: Internet expertise will moderate the relationship between satisfaction and e-loyalty Figure 3 - A Proposed Model for Managing e-loyalty in Business-to-Consumer Internet Commerce Dimensions of e-service Quality (esq) Usefulness P1 + P3a + Internet Expertise (IE) P3b + Entertainment Information Fit-to-task Satisfaction (es) P2 + Loyalty (el) Complementary Relationship MANAGERIAL IMPLICATIONS AND CONCLUSION Overall, we propose a framework for e-marketing and Website managers of the key concepts to consider to assess and manage e-loyalty in B2C e-commerce. Identifying these key constructs as perceived by customers, and there impact on customer loyalty, is a first step for organisations to improve the success of their online presence, and for effective marketing decision-making. Traditional ways of examining how consumers evaluate services rely heavily on the personal aspects of the service encounter. E-commerce, however, takes place without human-to-human interaction. As a result, e-marketers and Web managers must now engineer branded customer experiences (Carbone and Haeckel 1994) that influence customer perceptions of the firm, and tangiblise the service(s) provided online. Managers must now continuously innovate and improve the online service offering that strengthens customer relationships (Dutta and Segev 2001). Managers can use the proposed framework to ascertain their own e-service quality performance, and to pinpoint specific areas for improvement where gaps exist between customers expectations and perceptions of performance. Alternatively, managers could assess customer levels of importance versus perceptions of performance measures. Managers could also apply the framework to customer perceptions of competitor Websites to determine site differentiation and marketing intelligence purposes. 4
LIMATIONS AND FUTURE RESEARCH DIRECTIONS The principal limitation of this paper is that it is currently at the conceptual stage of development and as such, suffers from the shortcomings of empirical data to explore the proposed relationships within the model. Hence, future research should further develop the theoretical propositions and constructs of interest to produce testable hypotheses to empirically test the proposed relationships employing advanced statistical methods such as multiple regression and structural equation modelling (SEM). SEM enables researchers to answer a set of interrelated research questions in a single, systematic and comprehensive analysis by modelling the relationships among multiple independent and dependent constructs simultaneously (Gerbing and Anderson 1988). Therefore, this technique should be used to examine the series of relationships described in the model. The conceptual framework presented in this paper could be tested within e-retail and non e-retail contexts in the business-to-consumer setting such as pure retailing (e.g. online shopping), the entertainment industry (e.g. film/movies, professional sport, music and theatre), the hospitality industry (e.g. hotels and holiday resorts), financial services (e.g. banks, insurance and online stock broking firms). The proposed framework could also be tested on corporate e-business Websites to delineate the generalisability of the proposed relationships. Future research is needed in refining the operationalization of the WebQual dimensions in order to build a more robust scale to produce parsimonious results within these contexts. Finally, this framework can be tested in a global setting with Websites from around the world to capture the moderating effects of country culture on the perception of e-service quality and its related effects to build e-loyalty. REFERENCES Anderson E., Fornell C., and Lehmann D. (1994), Customer satisfaction, market share, and profitability, Journal of Marketing, July, vol. 56, pp. 53-66 Bruner G., and Kumar A. (2000), Web commercials and advertising hierarchy of effects, Journal of Advertising Research, January, vol. 40, pp. 35-42. Carbone L., and Haeckel S. (1994), Engineering customer experiences, Marketing Management, vol. 3, no. 3, pp. 8-19. Chen Q., and Wells W. (1999), Attitude towards the site, Journal of Advertising Research, September/October, vol. 39, pp. 27-37. Cronin J., Brady M., Thomas G., and Hult M. (2000), Assessing the effects of quality, value and customer satisfaction on consumer behavioural intentions in service environments, Journal of Retailing, vol. 76, no. 2, pp. 193-217. Dick A. and Basu K. (1994), Customer Loyalty: Toward an Integrated Conceptual Framework, Journal of the Academy of Marketing Science, Winter, pp. 99-113. Dutta S., and Segev A. (2001), Business transformation on the Internet, in Electronic Commerce and Virtual Business, eds S. J. Barnes and B. Hunt, Butterworth-Heinemann, Oxford. Gerbing, D. and Anderson, J. (1988), An Updated Paradigm for Scale Development Incorporating Unidimensionality and its Assessment. Journal of Marketing Research, vol. 25, pp. 186-92. Loiacono E., Watson R., and Goodhue D. (2002), WebQual: A measure of website quality, American Marketing Association Conference Proceedings, pp. 432-8. Mainspring and Bain & Company (2000). Profits depend on customer loyalty, 4 th April, available at: www.nua.ie/surveys/index.cgi?f=vs&art_id=905355695&rel=true Novak T., Hoffman D., and Yung Y. (2000), Measuring the customer experience in online environments: A structural modeling approach, Marketing Science, vol. 19, no. 1, pp. 22-42. 5
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