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IJQRM 23,3

Understanding the quality of relationships in consumer services

A study in a retail environment
Amy Wong
Universitas 21 Global, Singapore, and

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Received November 2003 Revised August 2004

Amrik S. Sohal
Department of Management, Monash University, Cauleld East, Australia
Abstract
Purpose The purpose of this study is to examine consumer perceptions of their shopping experience in a retail environment. Design/methodology/approach Based on the literature, a model of relationship strength is developed and empirically tested with a sample of consumers in a chain departmental store setting in Victoria, Australia. The model investigates the effect of service quality, trust, and commitment on relationship strength. The model then seeks to explore the impact of relationship strength on attitudinal outcomes such as relationship quality and behavioral outcomes such as customer loyalty. Interrelationships among these variables are also considered. The data are analysed using LISREL VIII as the proposed research model consists of a simultaneous system of equations having latent constructs and multiple indicators. Findings Overall, the ndings were consistent with hypotheses from the marketing/management literature. Empirical support is provided for the relationship between service quality and trust. Research limitations/implications Although this study found signicant relationships between the constructs in the research model, it should be taken into account that the levels of variance explained are relatively modest given the large sample size. In addition, the relationship strength model was tested using a cross sectional design making casual assessments difcult. Originality/value The research ndings could be generalized to services that share some common characteristics with regard to the nature of customer relationships in the retail industry, for example, banking, accounting, and insurance services. Keywords Customer relations, Customer services quality, Trust, Customer loyalty, Retail service industries, Australia Paper type Research paper

International Journal of Quality & Reliability Management Vol. 23 No. 3, 2006 pp. 244-264 q Emerald Group Publishing Limited 0265-671X DOI 10.1108/02656710610648215

Introduction In the recent years, customer relationships have received considerable attention from both academics and practitioners (Berry, 1995; Gwinner et al., 1998; Palmer, 2002; Reynolds and Beatty, 1999). The popularity of relationship marketing stems, in part, from the assumption that building customer relationships will lead to increased benets for the organization in the form of customer satisfaction, loyalty, word-of-mouth, and increased purchases. In the current literature, several different approaches have been used to identify these variables and to study their impact on relational outcomes. Researchers in the area have addressed topics such as how

companies benet from building long-term relationships (Parasuraman et al., 1991); customer motivations for maintaining relationships (Bendapudi and Berry, 1997; Sheth and Parvatiyar, 1995); the role of relational bonds in the development of customer relationships (Smith, 1998), and the relational benets customers receive from service relationships (Gwinner et al., 1998). Not surprisingly, the customer-contact employee relationship has been the focus of a wide variety of service and retailing research (Macintosh and Lockshin, 1997; Spies et al., 1997). For example, issues such as the customer-sales associate relationship (Beatty et al., 1996), the inuence of retail sales training (Pettijohn and Pettijohn, 1994), and the personalization of services (Mittal and Lassar, 1996) have been addressed in previous research. This stream of research supports the notion that the customer-contact employee interaction inuences overall service quality (Mittal and Lassar, 1996), customer satisfaction (Spies et al., 1997), customer loyalty (Beatty et al., 1996), and purchase intentions (Macintosh and Lockshin, 1997). Despite the growing importance and emphasis on relationship marketing, the operationalization of this concept is still unclear. According to some authors, studies on relationship marketing in consumer markets are still lacking (Reynolds and Beatty, 1999; Sheth and Parvatiyar, 1995). In instances where research has been conducted in consumer markets, they focused mainly on generic issues, and there has been little concentration on areas that are inuenced by the nature of the industry or transaction concerned (Pressey and Mathews, 2000). Besides, to date, there is a lack of studies that examine the various aspects of service that are vital to customer retention (Zeithaml, 2000). Moreover, the different outcomes (i.e attitudinal and behavioral) of relationship strength are left largely unexplored in the relationship marketing literature. Furthermore, there is a lack of studies that explore the impact of factors such as trust, commitment, deliberation, etc. on customer loyalty in extended service settings (de Ruyter and Bloemer, 1999). Finally, there is little empirical work investigating customer relationship economics, that is the link between attitudinal measures (i.e. service quality, customer satisfaction) and behavioral measures (i.e customer loyalty, word-of-mouth behavior, and long-term customer relationship protability) (Storbacka et al., 1994). Given the preceding discussion, a key challenge for researchers is to identify and understand how managerially controlled antecedent variables (e.g. levels of service quality delivered) can inuence the nature and degree of important relationship marketing outcomes (e.g. overall relationship quality and customer loyalty behaviors) (Hennig-Thurau et al., 2002). In view of the difculties that underpin our understanding of relationship marketing in consumer markets, this study attempts to investigate consumer perceptions of relationship strength in a retail environment. In doing so, this study develops and tests a model of relationship strength that incorporates variables such as service quality, trust and commitment, and test their impact on attitudinal outcomes such as relationship quality and behavioral outcomes such as customer loyalty. The focal variable of this study is on the formation of the customer-contact employee relationship as perceived by the customer. Customer contact employees are the face of the rm for the customer, and any interaction between the two is part of the service, and is therefore likely to affect any service delivery outcomes, repeat business, and ultimately, rm performance (Sergeant and Frenkel, 2000). Therefore, by selecting relationship strength as the focal variable of this study, the scope of this study is

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narrowed to those service settings in which relationship marketing is appropriate and the contact employee assumes the key implementation role in creating and maintaining close relationships with customers. Research hypotheses Relationship strength Relationship strength is dened as the extent, degree, or magnitude of relationship which is governed by the amount of trust and the level of commitment the customer feels towards the individual service provider (Bove and Johnson, 1999; Shemwell and Cronin, 1995). As such, this study incorporates the measure of relationship strength in its examination of the relationships that customers have with their retail salesperson as well as the retail store. In general, a strong, deep, and intense relationship is less vulnerable and more likely to continue in the future. Hence, the strength of a customer-contact employee relationship will impact on the extent to which the customer says positive things about the organization to other people, recommends the organization to someone who seeks his or her advice, and continues to do business with the organization in the near future. Service quality Service quality has been recognized as an important strategic retailing weapon, particularly in developing defensive marketing strategies (Fisk et al., 1993). Adopting a nroos (1984, p. 38) denes service quality as a perceived Nordic perspective, Gro judgement, resulting from an evaluation process where customers compare their expectations with the service they perceive to have received. The author also suggests that service quality issues can be split into technical quality (what is done) and nroos (1984) further declares that the quality of a functional quality (how it is done). Gro service is dependent on two variables: expected service and perceived service, and that any previous experience with a service could inuence the expectations of a consumer, whereas the perceived service is the result of a consumers perception of the service itself. Likewise, following an American perspective, Parasuraman et al. (1988, p. 17), based on exploratory research to understand the construct of service quality and its determinants, dened service quality as the degree of discrepancy between customers normative expectations for the service and their perceptions of the service performance. Perceived service quality is then interpreted from the differences in degree and direction between perceptions and expectations. The authors further describe service quality as consisting of dimensions such as reliability, assurance, tangibles, empathy, and responsiveness. Berry et al. (1988) contend that service quality has become a great differentiator and the most powerful competitive weapon which many leading service organizations possess. Delivering superior quality to customers is central to the formation of customer loyalty (Zeithaml, 1996); therefore, the competitive advantage of a service organization is essentially determined by its ability to expand and maintain a large and loyal customer base. Similarly, Dabholkar et al. (2000) suggest that consumers tend to evaluate different dimensions related to a service and eventually, they may form a separate overall evaluation of service quality. The dimensions of service quality then serve as antecedents to an overall evaluation of service quality, which in turn

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inuences the strength of their customer relationship, and subsequently, their behavioral intentions. Subsequently, enhanced service quality is essential to the formation of strong customer relationships. Hence, the following hypotheses are advanced: H1. Service quality is positively correlated with customer loyalty. H2. Service quality is positively correlated with relationship strength. Trust Trust has been dened in a variety of ways in the relationship marketing literature: as a willingness to rely on an exchange partner in whom one has condence (Moorman et al., 1992, p. 315), and as the belief that a partners word or promise is reliable and a party will full his/her obligations in the relationship (Schurr and Ozanne, 1985, p. 940). These two denitions of trust draw on Rotters (1971, p. 444) classic view that trust is a generalized expectancy held by an individual or group that the word, promise, verbal, or written statement of another individual or group can be relied on. These denitions stress the importance of condence on the part of the trusting partner. Anderson and Narus (1990, p. 45) focus on the perceived outcome of trust when they dene it as a partners belief that the other partner will perform actions that will result in positive outcomes, as well as not take unexpected actions that would result in negative outcomes. As such, one would expect a positive outcome from a partner on whose integrity one can rely on condently (Morgan and Hunt, 1994). Focusing on the retail industry, contact employees can deliver high levels of trust by continually demonstrating that they have the customers best interest at heart, that they have the skills required to meet customer needs, and that they have the ability to solve customer problems honestly and skilfully (Beatty et al., 1996). Also, contact employees can develop customers trust by exhibiting extensive product, merchandise availability, and fashion knowledge. These related factors of service quality contribute to the development of trust, and trust begins to develop as the customers experience positive service interactions and receive benets from this personal interaction. Given the preceding discussion, the following hypothesis is proposed: H3. Service quality is positively correlated with trust between the service exchange partners. nroos (1996, p. 12) suggests that the relationship philosophy approach relies Gro on. . .a trusting relationship with customers . . . instead of an adversarial approach to customers . . . . Clearly, trust is an important construct in relational exchange because relationships characterized by trust are so highly valued that parties will desire to commit themselves to such relationships (Hrebiniak, 1974). To reinforce this notion, trust has been posited as a major determinant of relationship commitment (Achrol, and Mo ller, 1990; Morgan n, 2001; Miettila 1991; Delgado-Ballester and Munuera-Alema and Hunt, 1994). Morgan and Hunt (1994) point out that individuals prefer trusting relationships; as a result, the parties involved will commit themselves to the organization as long as they enjoy trusting relationships. Sharing of information and experiences function as ways to demonstrate trust which lead to higher levels of commitment and a better atmosphere for subsequent transactions. Consequently, social exchange theory and the notion of reciprocity lead to a belief that with the

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presence of trust in a relationship, individuals will chose to respond through commitment to the relationship (Blau, 1964). Within a retail context, when customers form high levels of trust in the salesperson and the retail store they represent, they are more likely to pursue open communications and higher levels of obligation to make the relationship succeed and to make it mutually satisfying and benecial (Macintosh and Lockshin, 1997). As a result, having a positive relationship contributes to positive relationship outcomes such as trust and intentions to continue a relationship with the salesperson and the retail store (Crosby et al., 1990; Swan and Oliver, 1991). Subsequently, the following hypothesis is advanced: H4. Trust between the exchange partners is positively correlated with commitment. Commitment In the relationship marketing literature, commitment has been described in many ways. Moorman et al. (1992) dene commitment as an enduring desire to maintain a valued relationship. The term valued relationship emphasized the belief that commitment exists only when the relationship is considered important. This implies a higher level of obligation to make a relationship succeed and to make it mutually satisfying and benecial (Gundlach et al., 1995; Morgan and Hunt, 1994). Given the higher level of commitment among individuals who believe that they receive more value from a relationship, highly committed customers should be willing to reciprocate effort on behalf of a rm due to past benets received (Mowday et al., 1982). This view is consistent with Dwyer et al.s (1987, p. 19) denition of commitment in a buyer-seller relationship as the existence of an implicit or explicit pledge of relational continuity between exchange partners. In this context, the authors suggest that commitment implies a willingness to make short-term sacrices to realise longer-term benets. Within the literature on channels research, commitment has been conceptualized in terms of a temporal dimension, focusing on the fact that commitment becomes meaningful only when it develops consistently over time (Moorman et al., 1992). In addition, commitment has also been operationalized as a channel members intention to continue the relationship (Anderson and Weitz, 1989; Scheer and Stern, 1992). Committed partners are willing to invest in valuable assets specic to an exchange, demonstrating that they can be relied upon to perform essential functions in the future (Anderson and Weitz, 1992). These self-interest stakes alleviate the uncertainty and cost of continually seeking and consummating new exchanges, hence contributing to stronger relationships. Similarly, Kumar et al. (1994) use intention to stay in the relationship as an important desirable consequence of commitment that has a direct impact on supplier-customer relationships. Intention to stay reects the customers motivation to continue the relationship. Therefore, in view of the literature, the following hypothesis is proposed: H5. Commitment is positively correlated with relationship strength. Relationship quality Relationship quality has been discussed as a bundle of intangible values which augments products or services and results in an expected interchange between buyers

and sellers (Levitt, 1986). In general, relationship quality describes the overall depth and climate of a relationship (Johnson, 1999). Relationship quality also refers to a customers perceptions of how well the whole relationship fulls the expectations, predictions, goals, and desires the customer has concerning the whole relationship (Jarvelin and Lehtinen, 1996). As such, it forms the overall impression that a customer has concerning the whole relationship including different transactions. Hence, the following hypothesis is forwarded: H6. Relationship strength is positively correlated with relationship quality. Gummesson (1987) identies two dimensions of relationship quality in the service interface: professional relations and social relations. The former relationship is grounded on the service providers demonstration of competence, while the latter is based on the efcacy of the service providers social interaction with the customer. Subsequently, Holmlund (2001) suggests that there are three different types of content of quality perceptions in a business relationship, namely the technical, social, and economic aspects. The technical aspect relates to the offering at the core in a relationship, while the social aspect relates to the different types of social interactions on an individual and a company level. Finally, the economic aspect relates to costs and benets. The general consensus among researchers such as Crosby et al. (1990) and Dwyer and Oh (1987) is that relationship quality is a higher order construct made of several distinct, though related dimensions. Specically, Dwyer and Oh (1987) indicates that high levels of satisfaction, trust, and minimal opportunism distinguish quality relationships from non-quality relationships. Crosby et al. (1990) studied various aspects of relationship quality, and perceive it as a higher order construct consisting as a buyers trust in a salesperson and satisfaction in the relationship. Hence, high relationship quality implies that the customer is able to rely on the service providers integrity and has condence in the service providers future performance because the level of past performance has been consistently satisfactory. To further exemplify this view, research conducted by Bejou et al. (1996) concludes that customer-salesperson relationship quality is an important prerequisite to a successful long-term relationship. Therefore, the following hypothesis is posited: H7. Relationship quality is positively correlated with customer loyalty. Customer loyalty Within the relationship marketing literature, loyalty has been referred to as a favorable attitude towards a brand in addition to purchasing it repeatedly (Day, 1969); a relationship between relative attitude towards an entity and repeat patronage behavior (Dick and Basu, 1994); a situation when repeat purchase behavior is accompanied by a psychological bond (Jarvis and Wilcox, 1977); and repeat purchase intentions and behaviors (Peter and Olson, 1990). Customer loyalty, a key mediating variable in explaining customer retention (Pritchard and Howard, 1997), is concerned with the likelihood of a customer returning, making business referrals, providing strong word-of-mouth, as well as providing references and publicity (Bowen and Shoemaker, 1998). Loyal customers are less likely to switch to a competitor due to a given price inducement, and these customers make more purchases as compared to less loyal customers (Baldinger and Rubinson, 1996).

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Although most research on loyalty has focused on frequently purchased package goods (brand loyalty), the loyalty concept is also important for industrial goods (vendor loyalty), services (service loyalty), and retail establishments (store loyalty) (Dick and Basu, 1994). Accordingly, customer loyalty constitutes an underlying objective for strategic marketing and management planning (Kotler, 1984) and represents an important basis for developing a sustainable competitive advantage (Kotler and Singh, 1981). Customer loyalty has been considered as an important source of long-term business success (Rust and Zahorik, 1993), and building a relationship with a customer is a good way to retain loyal customers in the long-term (Sheaves and Barnes, 1996). To further reinforce this stance, a study conducted by Barnes (1997) suggested that it is unlikely that customers may be retained, often for very long periods, without a genuine relationship being present. Therefore, the following hypothesis is proposed: H8. Relationship strength is positively correlated with customer loyalty.

Research model Figure 1 depicts the relationship strength model that is advanced based on the literature. The major constructs in the model include service quality, trust, commitment, relationship strength, relationship quality, and customer loyalty, and the eight hypothesized paths depict the interrelationships among these constructs: H1. Service quality is positively correlated with customer loyalty. H2. Service quality is positively correlated with relationship strength. H3. Service quality is positively correlated with trust between the service exchange partners. H4. Trust between the exchange partners is positively correlated with commitment. H5. Commitment is positively correlated with relationship strength. H6. Relationship strength is positively correlated with relationship quality. H7. Relationship quality is positively correlated with customer loyalty. H8. Relationship strength is positively correlated with customer loyalty. The idea behind the relationship strength model reects the effects of service quality, trust, and commitment in predicting relationship strength. Indeed, an enhanced level of service quality will contribute to greater feelings of trust and commitment, which are elements essential to the formation of strong customer relationships. In addition, the incorporation of outcomes variables such as relationship quality (affect based) and customer loyalty (action based) can provide added insight into the nature and degree of relationship marketing outcomes. Subsequently, attention now turns to discussion of the research method used to test these hypotheses.

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Figure 1. A conceptual model of relationship strength

Research method Research setting, data collection and sample For data collection purposes, the mall intercept technique was used on shoppers who were leaving a large chain departmental store in Victoria, Australia. These shoppers have previously shopped at the retail store; therefore, they have developed a relationship with the store (de Ruyter and Wetzels, 1997). The characteristics of a chain departmental store make it a suitable choice for testing of the hypotheses. First, a chain departmental store was chosen because of the high degree of in-store browsing. Second, situational variables (e.g. geographic distance) played a less critical role in determining customer attitude and patronage behavior as opposed to supermarkets or convenience stores. In addition, customers from a variety of segments commonly visit department stores, in contrast to certain high priced specialty stores. Finally, the choice of a department store guaranteed variation in terms of products, services, and brands. Data was collected at eight different stores using a structured questionnaire with questions in a prearranged order. The questionnaires containing the measures, accompanied by a cover letter with a university letterhead, were administered during peak hours, over a four-day period, from Wednesday to Saturday, for eight weeks (one week dedicated to each store). The cover letter explained the purpose of the study, assured condentiality of data, and thanked the participant. As an initial screening question, shoppers were asked whether they have previously shopped at the retail store. Consequently, shoppers who have previously shopped at the retail store have

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developed a relationship with the store (de Ruyter and Wetzels, 1997). The researcher approached every third adult shopper leaving the retail store, asked whether he or she will participate in the study, and recorded all refusals. The questionnaires were administered to shoppers when they left the stores and this seemed to be the logical approach, as shoppers with limited time may not like to be intercepted before they accomplish their purpose for being at the store. The questionnaires were self-administered by interested participants who were provided a chair in a quiet area near the store exit and a clipboard for their convenience while completing the questionnaires. These participants were also informed of further assistance available from the researcher for clarication of questions. Shoppers were also given the choice to take away the questionnaire and complete it in their own time. To increase the response rate of the questionnaires, shoppers who chose the latter option were given a reply paid return envelope, so that the respondents incurred no additional costs. Besides, the respondents were advised to return the questionnaire within a ten-day period. Following this data collection procedure, a total of 1,261 usable questionnaires were collected. Specically, a response rate of 45.5 percent was generated via in-store survey administration while a response rate of 37.2 percent was achieved via reply paid mail. The main reason why shoppers elected not to participate in the study is due to the lack of time. In this case, non-response bias was checked by comparing the responses of the early respondents to the late respondents. Comparisons revealed no signicant differences between groups. The participants of this study were predominantly females (87 percent). Of the respondents, 25 percent had a household income of between $40,001 to $60,000, and most of the respondents were aged between 41 to 50 years of age. Some of the respondents, 23 percent, had two children in the household, 12 percent had one child, while 47 percent had none. Of the respondents, 42 percent were members of the Fly Buy card, a store loyalty card system. In addition, 42 percent of the respondents spent approximately 20 percent of their retail purchases at the store in the past 12 months, while 30 percent spent approximately 40 percent of their retail purchases at the store in the past 12 months. Interestingly, 62 percent of the sample has shopped at the store for more than ten years, and this further reinforces the fact that shoppers have previously shopped at the store and have developed a relationship with the store. Measures All measures used in this study were estimated on seven point Likert scales. Service quality. Following the work of Dabholkar et al. (2000), service quality was measured using four Likert scale items, i.e in terms of service delivery, retail store XYZ: has an excellent overall service; has a service of very high quality; provides a high standard of service, and delivers superior service in every way. Trust. Trust was measured using three items identied by Morgan and Hunt (1994): the employees of retail store XYZ can be trusted at all times; retail store XYZ can be counted on to do what is right, and the employees of retail store XYZ have high integrity. Commitment. Commitment was measured using three items from a commitment scale developed by Morgan and Hunt (1994): I am very committed to maintain my relationship with the employees of retail store XYZ; my relationship with the

employees of retail store XYZ is very important to me, and I plan to maintain my relationship with the employees of retail store XYZ. Relationship strength. Relationship strength was assessed using four items in this study. Respondents were asked to state their overall assessment of the strength of their relationship with the contact employee as well as with the company. Following the concept of a closeness gap as suggested by Barnes (1997), respondents were also asked to evaluate how close they would like the relationship to be. By rating the strength of their relationship and then indicating how close they would like the relationship to be, the gap score, or the difference between the two items could be measured. Relationship quality. Relationship quality was assessed using two items. Although several studies measured relationship quality using dimensions such as trust, commitment, product/service-related quality perceptions, and customer satisfaction (Crosby et al., 1990; Dwyer et al., 1987; Hennig-Thurau, 2000; Smith, 1998), these dimensions are measuring sources related to relationship quality, and they do not form part of the construct. Hence, to operationalize relationship quality, respondents were asked to state their overall assessment of the quality of their relationship with the contact employee as well as with the company. Customer loyalty. Four items adopted from the Recongured Behavioral Intentions Battery (Parasuraman et al., 1994) were used to measure customer loyalty: I say positive things about retail store XYZ to other people; I recommend retail store XYZ to someone who seeks my advice; I encourage friends and relatives to shop at retail store XYZ, and I consider retail store XYZ as my rst choice in the next few years. Validity and reliability of measures Before testing the hypothesized relationships in the relationship strength model, the scales used to operationalize the constructs were examined through the estimation of the measurement model (Anderson and Gerbing, 1988). Conrmatory factor analysis (CFA) was used to assess the unidimensionality and validity of the constructs. The resulting measurement model x 2 155 was 1866.86, p 0:000. To determine reliability, the Cronbachs (1951) coefcient alpha was used to separately assess the reliability of the scales adopted in this study. All composite reliabilities for the multi-item scales were above 0.87. All of the loadings in the model were signicant (see Table I). Discriminant validity was evaluated by testing whether pairs of construct were correlated less than unity. The chi-square difference test with one degree of freedom was used to test for unity between the constructs. All tests were signicant at the one percent signicance level. Inspection of the correlation matrix and the respective standard errors reveals that none of the correlations are within two standard errors of 1.0. Therefore, there was evidence for discriminant validity for the constructs used in this study. Applying Fornell and Larckers (1981) test of average trait variance extracted, all the constructs pairs demonstrate that the average variance extracted from the traits exceeds the squared correlation estimate between the two constructs. Having established adequate validity and reliability, the ndings were subsequently analysed using SPSS version 10 and LISREL VIII. Results Table II presents the scale means, standard deviations, and correlations for the study variables. An examination of the pair-wise correlations among the variables provides

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Item/construct Overall service quality In terms of service delivery, retail store XYZ: Has an excellent overall service Has a service of very high quality Provides a high standard of service Delivers superior service in every way Trust In terms of my experience with retail store XYZ: The employees of retail store XYZ can be trusted at all times Retail store XYZ can be counted on to do what is right The employees of retail store XYZ have high integrity Commitment In terms of my experience with retail store XYZ: I am very committed to maintain my relationship with the employees of retail store XYZ My relationship with the employees of retail store XYZ is very important to me I plan to maintain my relationship with the employees of retail store XYZ Customer loyalty In terms of my loyalty to retail store XYZ: I say positive things about retail store XYZ to other people I recommend retail store XYZ to someone who seeks my advice I encourage friends and relatives to shop at retail store XYZ I consider retail store XYZ my rst choice in the next few years Relationship strength Relationship with the employees of retail store XYZ: What is your overall assessment of the strength of your relationship with the employees at retail store XYZ? How strong would you like the strength of your relationship with the employees at retail store XYZ to be? Relationship with retail store XYZ: What is your overall assessment of the strength of your relationship with retail store XYZ? How strong would you like the strength of your relationship with retail store XYZ to be? Relationship quality What is your overall assessment of the quality of your relationship with the employees at retail store XYZ? What is your overall assessment of the quality of your relationship with retail store XYZ?

Standardized loading

T-value

Composite reliability 0.96

254

0.95 0.96 0.95 0.90

45.09 46.46 45.57 41.51 0.87

0.83 0.83 0.89

35.14 35.46 38.96 0.91

0.87 0.90 0.94

38.33 40.59 43.92 0.92

0.83 0.93 0.94 0.84

35.81 43.42 44.40 36.57 0.90

0.86 0.79

38.10 33.05

0.91 0.82

41.43 34.82 0.90

0.87 0.88

37.88 38.68

Table I. Item measurement properties

preliminary support for the hypotheses. The pair-wise correlations also reveal signicant and positive relationships among the independent variables as expected. Following measurement purication, the path relationships within the relationship strength model were analyzed by structural equation modelling (SEM) using LISREL reskog and So rbom, 1996). In this instance, LISREL VIII was used for data VIII (Jo analysis as the proposed research model consists of a simultaneous system of equations having latent constructs and multiple indicators. The t indices of the research model shown in Figure 2 are acceptable x 2 1966:31; df 162; p , 0:001;GFI 0:95; CFI 0:96; NFI 0:96; RMSEA 0:09; SRMR 0:03: Given the relatively large sample size n 1; 261; unnormalized and normalized incremental t indices (IFI) suggested by Bentler and Bonnett (1980) were computed to demonstrate the contribution of the proposed research model over the null model. The authors note that an IFI of 0.90 or higher suggests a good t for models with large samples. The unnormalized and normalized IFI for the model are 0.96 each. The results of the SEM for the structural model shown in Figure 2 are presented in Table III. Results of the SEM shown in Table III provide support for seven of the eight hypotheses. Service quality is signicantly and positively related to customer loyalty H 1 0:28; t 10:98 and relationship strength H 2 0:18; t 7:46. Hence, support is provided for these two hypotheses despite their relatively low standardized coefcients. The SEM results also provide support for H3-H6, with relatively high standardized coefcients ranging from 0.67 to 0.87. With regard to the effects of relationship quality and customer loyalty, the SEM results provide support for the hypothesized relationship H 7 0:47; t 2:29. Finally, no support is provided for H8 H8 0:12; t 0:54. One reason for the insignicant relationship between relationship strength and customer loyalty could be due to the role of relationship quality in predicting customer loyalty. Furthermore, the high standardized coefcient between relationship strength and relationship quality suggests the mediating role of relationship quality between relationship strength and customer loyalty. Discussion This study affords further insight into the effects of service quality. The ndings imply that service quality related factors such as being consistently courteous to customers, instilling condence in customers, having the knowledge to answer customers enquires, and having the ability to handle customer complaints assist in the establishment of higher levels of trust. This provides empirical support for the relationship between service quality and trust. In addition, this study demonstrates

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Variable 1. 2. 3. 4. 5. 6. Service quality Trust Commitment Relationship strength Relationship quality Customer loyalty

Mean 4.88 4.71 4.17 3.99 4.31 4.25

SD 0.89 0.87 1.27 1.26 1.23 0.77

1 0.758 0.615 0.533 0.553 0.586

0.688 0.554 0.575 0.641

0.717 0.686 0.753

0.802 0.615

0.628

Note: Correlation is signicant at the 0.01 level (2-tailed)

Table II. Means, standard deviations, and correlations

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Figure 2. A model of relationship strength (n 1,261)

Parameter H1 H2 H3 H4 H5 H6 H7 H8

Description Service quality ! customer loyalty Service quality ! relationship strength Service quality ! trust Trust ! commitment Commitment ! relationship strength Relationship strength ! relationship quality Relationship quality ! customer loyalty Relationship strength ! customer loyalty

Standardized estimates 0.28 0.18 0.77 0.73 0.67 0.87 0.47 0.12

t-values 10.98 * * 7.46 * * 23.23 * * 20.66 * * 19.64 * * 27.51 * * 2.29 * 0.54

Hypothesis supported Yes Yes Yes Yes Yes Yes Yes No

Table III. Parameter estimates for the research model

Notes: Signicance levels are denoted as *p , 0.05, * *p , 0.001

that in order to establish and maintain long-term customer relationships, retail rms need to focus on improving their level of service quality, especially in the provision of service quality factors relating to the caring and individualized attention that a service provider gives to customers. This establishes an empirical association between service quality and relationship strength. Moreover, this study emphasises elements of a customer-contact employee relationship that are particularly important in determining high levels of trust and commitment that the customer feels towards the service provider or the service rm. Previous research has posited trust as a major determinant of relationship commitment and Mo ller, n, 2001; Miettila (Achrol, 1991; Delgado-Ballester and Munuera-Alema 1990; Morgan and Hunt, 1994). The results of this study show that trust contributes positively to commitment. Specically, the behaviors and attributes of employees inuence customers satisfaction with their shopping experiences and their level of trust in the employees (Kennedy et al., 2001). Indeed, factors of trust relating to employees who can be relied on to keep their promises, employees who are sincere and honest, employees who put the customers interests before their own, and employees who are responsible can assist in the development of customer commitment. Moreover, factors of trust such as the ability of the retail store to do what is right for its customers and the retail stores understanding of its customers contribute to the establishment of customer commitment. All these factors of trust are a precondition for increased customer commitment. Consequently, this study supports the notion that commitment is essential to the development and maintenance of strong customer relationships. Hence, relationship marketing programs directed towards high relational customers should focus on building and maintaining customer commitment. One way to achieve high levels of customer commitment is to ensure that retailers recruit employees who like to interact with customers and are willing to base their customer relationships on repeated interactions built on the concept of commitment (Beatty et al., 1996). Besides, retail rms should screen their sales personnel carefully to ensure a good job t that will contribute to the establishment and maintenance of strong customer-salesperson relationships. This screening can be done via relevant personal histories and through the use of interpersonal role-playing situations within the interview environment (Crosby et al., 1990). Furthermore, when hiring contact employees, rms should screen applicants for the social abilities that facilitate establishing and maintaining long-term relationships based on the concepts of trust and commitment. To reinforce these efforts, trust and commitment-building activities on the part of all employees should be encouraged and taught. For example, employee team exercises aimed at improving service delivery standards, joint problem identication, analysis of customer complaints, and the provision of assistance to colleagues in dealing with customers should be encouraged. Overall, the results suggest that there is considerable opportunity for retail managers to improve retail performance by encouraging and training employees to develop and nurture relationships with customers. Since customer trust and commitment appear to be such important factors in determining the strength of customer relationships, training focusing on enhancing customer trust and commitment would be particularly benecial. For example, employees should be trained to solve customer problems as their own and to become personally involved

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with the customer. Activities such as understanding customer needs and preferences, contacting customers about upcoming sales and new merchandise arrivals, coordinating merchandise for customers ahead of time, and reminding customers of important dates should be emphasized in training sessions. Case studies on handling complex customer requests may be used to demonstrate problem solving and decision making skills. In addition, ongoing training in extensive and up-to-date merchandise knowledge is extremely essential. This study suggests that retail managers need to consider not only the quality of the service they provide, but also the quality of customer relationships. As such, retail managers can use the relationship quality scale proposed in this study to monitor the quality of their customers relationships with them, as well as the effectiveness of their relationship marketing programs aimed at building customer relationships. This customer relationship assessment tool can provide feedback as to how the quality of their customer relationships is changing in response to managerial actions and implementation of strategies. In order to encourage the development of relationships between customers and employees, retail rms should implement effective ways of rewarding customers for developing interpersonal relationships with employees. As such retail rms might even point out to their customers the benets of knowing a specic person within the organization. To do this, retail rms can make use of database capabilities to reward their loyal customers. Despite this, extra care must be exhibited in placing too much emphasis on developing relationships with customers, as not all customers desire interpersonal relationships with their service provider (Bendapudi and Berry, 1997; Goodwin and Gremler, 1996). Yet, in some situations, customer loyalty behaviors can still be encouraged and generated via alternative methods such as providing customers with the option of user friendly and functional self-service technologies, or providing customers with the option of on-line interactive information as well as online purchasing of the retail rms products and services. To this end, the challenge for retail managers is to be adept in applying the relationship strength model to their businesses. The model will serve managers well if it is used as a diagnostic tool to evaluate the links between the constructs, rather than as a model which a priori explains those links. Specically, managers have to test the model in their particular business context and conduct the analysis of the data themselves in order to see whether the links do actually relate to their businesses environment. The organizations competitive strategy and management philosophy can then be developed on the basis of this analysis. More importantly, the organizations strategic vision must be communicated to employees and this must be in line with the business realities that the employees are familiar with. Conclusion, limitations and future research This study developed a theoretical rationale for, and empirically tested the effect of service quality, trust, and commitment on relationship strength. A model of relationship strength was proposed. This model explored the impact of relationship strength on attitudinal outcomes such as perceived relationship quality and behavioral outcomes such as customer loyalty. Overall, the ndings were consistent with hypotheses from the services marketing/management literature. As with any research, care should be taken when generalizing the results of the study. Although this study found signicant relationships between the constructs in

the research model, it should be taken into account that the levels of variance explained are relatively modest given the large sample size. In addition, the relationship strength model was tested using a cross sectional design making casual assessments difcult. Hence, to better assess causality, future research could test the relationship strength model in an experimental setting utilizing scenarios to manipulate key constructs. Even though considerable attention was given to identifying indicators affecting relationship strength, it is possible that additional constructs could moderate the relationships proposed within the relationship strength model. Some potential moderators include the physical surroundings or atmosphere of the service environment, the role of other customers (former, present, and future) in the relationship development process, the internal service quality and service culture of the organization, as well as the gender and demographic makeup of the service provider. Investigation of various moderating variables in the relationship strength model could be done by exploring a multitude of contexts and thus obtaining considerate variability across such variables. In addition, the ndings of this study are conned to the retail chain departmental store sector in Victoria, Australia, thus the effects of extraneous variables based on industry or cross-cultural differences may limit its potential generalizability to other service-oriented industries. As such, generalizability would be enhanced by replications of the ndings across various industries and countries. In order to apply the model to extended service settings or to a cross-cultural context, there is a need for further customization of the measurement scales used in this study. However, despite this caveat, the research ndings could be generalized to services that share some common characteristics with regard to the nature of customer relationships in the retail industry. For example, the relationship strength model proposed and tested in this study might be applicable to services that reect the following traits: . customers have an ongoing desire for the service; . customers have control over selection of service supplier; and . alternate service suppliers are available. Banking, accounting, and insurance services share some of these traits, as the personal relationship between the customer and the contact employee is often more essential relative to other aspects of the service than it is in services such as cable television or utilities service. It is integral that future comparative studies also investigate multiple rms within each service type to provide an assessment of the differences/similarities that exists across service types. As discussed previously, the proposed relationship strength model is not expected to apply in situations where the customer has no alternative choices for services. Yet, these types of services do exist, including many utilities services such as electric, gas, or local telephone services. Although the relationship strength model is not directly applicable in these situations, conrmation of the expected appropriateness of the model in such contexts is needed. Consequently, deregulation in these industries is expected to continue, and customers may soon have a range of service providers to choose from. Therefore, examination of such services may also provide direction as to how loyalty can be cultivated among customers who previously had no choice, in order to encourage them to remain with the service provider.

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Having recognized the scope and limitations of this study, the theoretical and managerial implications are nonetheless worthy of consideration. Future research should not only expand the discussion on customer relationship management, but also provide new insights into how retailers can effectively differentiate their stores from competitors.

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