The Relationships among e-Service Quality, Value, Satisfaction and Loyalty in OnlineShopping

Hsin Hsin Chang, National Cheng Kung University, Taiwan (R.O.C.)Hsin-Wei Wang, National Cheng Kung University, Taiwan (R.O.C.)

ABSTRACTSince the online market has been growing rapidly overthe past

several years, e-commerce marketing activities have drawn a lot ofattention. The main purpose of the study is to develop acomprehen-sive research model of explaining the user's online shoppingbehavior. Empirical analyses are performed using structural equa-tions modeling analysis and results indicated that e-service qualitywould not affect the on-line shopping customer loyally directly butindirectly Ihrough the mediation of perceived value and customersatisfaction. And perceived value would not only affect the cus-tomer loyalty directly but also indirectly through the mediation ofcustomer satisfaction.

INTRODUCTIONThe business-to-customer (B-to-C) online market has been

growing rapidly over the past several years. Reichheld & Schefter(2000) survey shows that consumers have increasingly favoredonline shopping. In the consumer marketing community, customerloyalty has long been regarded as an important goal. According toTaiwan Market Intelligence Center industry analysis (2006), onlineshopping market in Taiwan amounted to $59.8 billion last year with54% growth rate compared to former year. Growth rate forecast forthis year is 50%. with sales amount to $ 89.3 billion, and might beup to S131.1 billion next year. Numerous studies have pointed outthat two of the more effective means of generating customer loyaltyare todelight customers (Oliver. 1999) and todeliver superior valuederived from excellent services and quality products (Parasuramanand Grewal. 2000).

Similar to a retail storefront, the electronic service quality (e-SQ) provides significant information and feeling to current andprospective target-market customers.Thus, if the service can achievewhat users want in a website is an important area of study.Developing a website that is responsive to user needs is critical forall site designers and mangers. For website retailer to be successfuland for customers to be satisfied, excellent e-service quality isessential. There are several factors to be considered, including thewebsite design, reliability, security, and customer value(Wolfinbarger and Gilly. 2002; Aladwani and Palvia. 2002). Fur-thermore, it would be interesting to determine if these characteris-tics of the e-service quality have a potential influence on customersatisfaction.

Several researchers have attempted to confirm the relationshipbetween satisfaction and loyally in their research (Woodside, Frey.& Daley. 1989; Cronin & Taylor, 1992; Oliver. 1999). The relation-ship seems almost intuitive, however, the strength of the relation-ship between satisfaction and loyalty has been found to varysignificantly under different conditions (Anderson & Srinivasan,2003),

Customer perceived value has recently gained much attentionfrom marketers and researchers because of the important role itplays in predicting purchase behavior and achieving sustainablecompetitive advantage (ZeithamI, 1988; Bolton & Drew. 1991;Parasuraman, 1997). Customer Perceived value involves "A "get"component—i.e., the benefits a buyer derives from a seller'soffering—and a 'give' component—i.e., the buyer's monetary and

nonmonetary costs in acquiring the offering".Researchers have also established a positive relationship be-

tween perceived value and intention to purchase/repurchase (Dtxltis.Monroe. & Grewal, 1991 ; Parasuraman & Grewal, 2000). When theperceived value is low. customer will be more inclined to switch tocompeting businesses in order to increase perceived value, thuscontributing to a decline in loyalty. Even satisfied customers areunlikely lo repurchase on the same web site, if they feel that they arenot getting the best value for their give. Instead, they will seek outother web sites in an ongoing effort to find a better value (Andersonand Srinivasan, 2(X)3).

It is only a mouse click away in electronic commerce (e-commerce) settings, so it is critical that companies understand howto build customer loyalty in online marketing. Since the e-servicequality and customer perceived value of Internet Websites areregarded as the key influential factors for Internet marketing, amore detailed evaluation of e-service quality and customer per-ceived value may become a necessity. Although previous studieshave recommended the importance of perceived quality in experi-ential marketing, few studies have empirically developed a frame-work to measure the e-service quality and value of experientialmarketing in Internet Websites and distinctly interpreted the effectof different level of customer satisfaction and perceived value onthe customer loyalty. We hope this study will add a little to theunderstanding of electronic commerce.

There are two objectives in this study. First, this study identi-fied key antecedents that are likely to influence customer satisfac-tion and customer loyalty in online shopping environments.Sec-ond. this study integrated relevant literature and develop a compre-hensive research model of experiential marketing to explain theuser's online shopping behavior.

LITERATURE REVIEW AND HYPOTHESES

E-Service QualityThe Internet remains a critical channel for selling most goods

and services (ZeithamI, Parasuraman, Malhotra. 2(X)2). Today, themost successful electronic commerce companies are beginning torealize that not only low price and web presence were initially butalso the delivering of the high e-service quality became important(Yang and Jun, 2002; ZeithamI. Parasuraman, Malhotra, 2002),The first formal definition of web site service quality or electricservice quality (e-SQ) was provided by ZeithamI. Parasuraman,and Malhotra (2001). ZeithamI et al.(200I) defined e-SQ as theextent to which a web site facilitates efficient and effective shop-ping, purchasing, and delivery of products and services. The onlineshopping can fulfill several consumers' needs more effectively andmore efficiently compared with the conventional shopping (Grewal,Iyer, and Levy, 2004; Monsuwe et al. 2004). Online customers thusexpect equal or higher levels of service quality than traditionalchannels customers (Lee and Lin, 2005). Therefore, many aca-demic researchers in online shopping have recently focused on thee-service quality to attract potential customers and on how to retaincurrent customers (Jun et al.,2004). As a result, a fundamentalunderstanding of factors impacting online customer satisfaction is

10 European Advances in Consumer ResearchVolume 8, © 2008

European Advances in Consumer Research ( Volume 8) / II

of great importance to electronic commerce (McKinney et al.2002).

Customer Satisfaction and LoyaltyOliver ( 1997) slated that satisfaction is a summary psycho-

logical state resulting when the emotion surrounding discontinuedexpectations is coupled with the consumer's prior feelings about theconsumption experience. Kotier (2000) also expresses that satisfac-tion is a person's feelings of pleasure or disappointment resultingfrom comparing a product's perceived perfonnance (oroutcome) inrelation to his or her expectations. Many researchers explored therole of satisfaction in the electronic commerce. Anderson andSriniva.san (2003) investigate electronic commerce and defined e-satisfaction as the contentment of the customer with respect to hisor her prior purchasing experience with a given electronic com-merce firm. Mckinney et. al (2002) posited that web-customersatisfaction has two distinctive sources-satisfaction with the qual ityof web-site's information content and satisfaction with the web-site's system performance in delivering information. Based on thedefinitions in this literature, we here define customer satisfaction as"the psycliological reaction of the customer with respect to his orher prior experience with comparison between expected and per-ceived performance".

Enge!, Kollat. and Blackwell (1982) deñned brand loyalty asthe preferential, attitudinal and behavioral response toward one ormore brands in a product category expressed over a period of timeby a consumer". Anderson and Srinivasan (2003) investigate theelectronic commerce and defined customer loyalty as "the customer'sfavorable attitude toward an electronic business resulting in repeatbuying behavior". Based on this literature, we here adopt a defini-tion of customer loyalty as "A commitment of repeat buying apreferred product!service and positive word of mouth consistentlyill the future"

Parasuraman et al. (1985, 1988) specifically suggested thatservice quality is an antecedent of customer satisfaction. Severalstudies have modeled service quality as an antecedent to behavioralintentions and found a significant link (Bitner. 1990; Boulding etal., 1993; Zeithamlet al.. 1996>. Website quality has been demon-strated to significantly influence consumers" online shopping atti-tudes and behavior. Better website quality can guide the consumer'scomplete transactions smoothly and attract them to revisit thisinternet store (Li and Zhang. 2002). Szymanski and Hise (20(X))found that aspects associated with product information and web sitedesign are important determinants in forming customer satisfac-tion. Satisfaction is a necessary prerequisite for loyalty but is notsufficient on its own to automatically lead to repeat purchases orbrand loyalty (Bloenier and Kasper. 1995). A dissatisfied customeris more likely to search for information on alternatives and morelikely to yield to competitor overtures than is a satisfied customer(Anderson and Srinivasan. 2(X)3). Based on this relationship amonge-service quality, customer satisfaction, and customer loyalty, wepropose the following hypotheses:

Hypothesis ! : E- Service quality will have an impact oncustomer satisfaction.

Hypothesis 2: E- Service quality will have an impact oncustomer loyalty.

Hypothesis J: Customer satisfaction will have an impact oncustomer loyalty.

Customer Perceived ValueCustomer value represents the trade-off between the quality,

or benefits, the customer receives and the costs, such as monetary.

energy, time and psychic transaction costs, the customer incurs byevaluating, obtaining and using a product (Kotier, 1977). Zeithaml(1988) defined the perceived value as the consumer's overallassessment of the utility of a product based on perceptions of whatis received and what is given. Keeney(1999) defined the valueproposition associated with internet commerce as the net value ofthe benefits and cost of both a product and the processes of finding,ordering, and receiving it, Based on a synthesis of previous defini-tions, perceived customer value is defmed here as"a consumer'sperception of the net benefits based on perception of what isreceived and what is given." Lindgreen and Wynstra( 2(X)5) thinkthat customer value has at least two dimensions . The first of thesedeals with the value of the (augmented) goods and services, whilethe second one focuses on the value of buyer-seller relationships.In this paper we focus on the value of the (augmented) goods andservices.

Choia et al. (2004) postulated that value perceptions of medi-cal services will be directly infiuenced by perceived service quality.Perceived value contributes to the loyalty of an electronic businessby reducing an individual's need to seek alternative service provid-ers (Anderson and Srinivasan. 2003).In electronic commerce, of-fering low customer transaction costs creates customer value,increases firm performance and contributes to competitive advan-tage (Chircu and Mahajan, 2006). In other words. When theperceived value is low. customers will be more inclined to switchto competing businesses in order to increa.se perceived value, thuscontributing to a decline in loyalty (Anderson and Srinivasan,2(K)3), Based on above relationship, we propose the followinghypotheses:

Hypothesis 4: E- Service quality will have an impact oncustomer perceived value.

Hypothesis 5: customer perceived value will have an impacton customer satisfaction.

Hypothesis 6: customer perceived value will have an impacton customer loyalty.

.L

METHODOLOGY

Research ModelThis research proposed an integrative model to explain the

user's online shopping behavior which based on established rela-tionships among e-service quality (web site design, reliability,security and customer service), customer satisfaction, customerloyalty, and customer perceived value (presented in Figure 1 ). Themodel of this research is based on Fomell'set al.(I996) customersatisfaction index (CSI) model which measure the antecedents ofoverall customer satisfaction- expectations, perceived quality, andvalue and the consequences of overall customer satisfaction- voiceand loyalty.

MeasuresIn order to measure the various constructs, validated items

used by other researchers were adapted. The various dimensions ofthe e-service quality were talk about. Wolfinbarger and Gilly(2(X)2)developedascalenamed.comQ. And Zeithaml, Parasuramanand Malhotra (2002,2005) developed the E-S-QU AL and E-RecS-QUAL for measuring the service quality delivered by Web sites onwhich customers shop online. In this research, we found the twoscales have many similar aspects and combine them as our measur-able variables of e-service quality with four dimensions: web sitedesign, reliability, security, and customer service. Customer per-ceived value was assessed with two items based on the perceived

12 / The Relationships among e-Service Quality, Value, Satisfaction and Loyalty in Online Shopping

FIGURE 1^ Proposed conceptual fratnework

CustomerSatisfaction

Customer

Perceived

Value

utility/worth resulting from the trade-off of "get" versus "give-up" (ZeithamI. I9S8). In this paper, we measure customer per-ceived value by the scale from Dodds, Monroe and Grewal (1991),Anderson and Srinivasan (2003). Customer satisfaction was as-sessed by adapting the scale developed by Oliver (1980) andAnderson and Srinivasan (2(X)3). Lastly, customer loyalty wasevaluated by using scale items adapted from Berry and Parasuraman( 1996) and Anderson and Srinivasan (2(X)3) and Yang and Peterson(2004). Each items was used 7-point Likert scales ranging from"strongly disagree" to "strongly agree". A questionnaire initiallyincluding 29 items was generated, consisting of 14 items for e-service quality. 3 items for customer satisfaction, 8 items forcustomer loyalty and 4 items for customer perceived value.

Pilot TestThis study evaluated the results of the pilot test by using

Cronbach's reliability and exploratory factor analysis. The threestatements were deleted after the pilot test. Uliimately. a final 26-item survey questionnaire contained four parts including 14 itemsfor e-service quality, 3 items for customer satisfaction, 8 items forcustomer loyalty and 4 items for customer perceived value.

Data CullectionIn order lo measure reliability and validity, a pretest was

conducted. A pilot test of the measures was conducted by 70respondents who were asked to provide comments on the relevanceand wording of the questionnaire items and adjusted based on theircomments. In the formal questionnaire, the data were gatheredthrough Internet questionnaire of Chungwa Telecom Co.. Ltd inTaiwan. For the final survey, a total of 350 survey questionnaireswere collected from respondents who had online shopping experi-ence. 20 invalid questionnaires were eliminated and 330 question-naires retained for analysis. The response rate is 94.3%. Onlinequestionnaire also conilrm that our sample have experiences to use

internet. In the aggregate sample, 44.8% of respondents are menand 55.2% are women. More than 85% of the respondents are Ygeneration people defined as people bom among 1976 to 1985.Almost 95% of the respondents" education is at institute/collegelevel and above. 45.7% of the respondents are students and 54.3%are workers. Approximately 48.6% of the respondents use theInternet more than 20 hours each week. In disposable income, about71. l%ofthe respondents have less than 10,000 dollars per month.More than 67% of respondents pay for Internet purchases by creditcard or ATM transfer account. Besides, the respondents also showsome interesting characteristics. The top three products purchasedonlineinourstudy are computer equipment (100). books (87), andclothes (79). ,... . - - .

DATA ANALYSIS AND RESULTSt .

Validity and ReliabilityWe adopted confirmatory factor analyses to verify the reliabil-

ity and validity of the measurement model. Reliability and Conver-gent validity of the constructs were estimated by composite reliabil-ity and average variance extracted. All of the factor loadings of theitems in the research model were greater than 0.05(see Table I),with most of them above 0.70. The composite reliability were allabove the recommended 0.7 level (Hair, 1997). Finally, convergentvalidity can assessed by the average extracted variances were allabove the recommended 0.5 level (Hair. Anderson. Tatham. andBlack, 1992). Therefore, all constructs in ttie model had adequatereliability and convergent validity. ' • • ' • .

Structural Model 'The purpose of this study is to fmd out the relationships

among e-service quality, customer satisfaction, cu.stomer loyalty,and customer perceived value. The causal relationship of all thevariables in the proposed research model was tested using structure

European Advances in Consumer Research (Volume 8) 113

TABLE 1Structural Model Estimates

HyputhesizedRelationship

AVEO0.5)

CR Fatlor t-vulue Conclusiun

E-service qualityWebsite designReliabilitySecurityCustomer .service

0.560.540.750.57

0.67

0.68

Q.8347349Ô0.80

•

0.86

0.730.740.740.72

0.870.810.850.76

0.830.720.83

12.8X12.9512.54

18.6920.4716.85

2.4214.6317.72

significantsignificantsignificantsignificant

significantsignificantsignificantsignificant

significantsignificantsignificant

Customer perceived valueCPVICPV2CPV3CPV4

Custümer satisfactiunS AT ISAT2SAT3

Custumer luyaltyRepurchase intentionWord of mouth

0.590.64 0.78

0.810.89 17.60

significantsignificant

H1 : E-service quality-^Customer SatisfactionH2: E-service quality—»Customer LoyaltyH3; Customer Satisfaction—»Customer LoyaltyH4: E-service quality-^Perceived ValueH5: Perceived Value—»Customer SatisfactionH6: Perceived Value—»Customer Loyalty

0.650.290.840.74

0.3320.341

8.091.744.8111.474.8123.595

SupportedNot supported

SupportedSupportedSupportedSupported

equation modeling (SEM) as performed in LISREL8. 52 software.The goodness-of-fit indices Torourtesting mode! areas following:Chi-square to degrees of freedom ratio is 3. GFI is 0.922. AGFI is0.882, NFI is 0.962 ,CFI is 0.973. RMR is 0.052 and RMSEA is0.083 which are all within the accepted thresholds as suggested inthe literature. Thus, we ensure that our research model is adequaterepresentation of the entire set of causal relationship.

Tests of HypothesesMost of the proposed hypotheses were supported except for

H2 (E-service quality- Customer loyalty)(see Table 1). E-servicequality has significant impact on customer satisfaction {y= 0.65, t-value=8.09) and customer perceived value (7=0.74, t-va!ue= 11.47).Bute-service quality has not significant impact on customer loyalty{-(= 0.29, t-value=1.74). Moreover, customer satisfaction has sig-nificant impact on customer loyalty (7= 0.84, t-vaíue=4.81 ). There-fore, results of the analy.sis supported HI, H3. and H4. These resultsindicated that e-service quality would not affect their on-lineshopping customer loyalty directly but indirectly through the me-diation of perceived value and customer satisfaction. Finally,customer perceived value has significant impact on customersatisfaction {ß= 0.332, t-value=4.812) and customer loyalty (ß=0.341. t-value=3.595). Therefore, results of the analysis supportedH5 and H6. These results are in conformity with the theories ofexperiential consumer behavior.

CONCLUSIONS AND LIMITATIONS

ConclusionsThis study was intended to make contributions to the current

understanding of online shopping consumer behavior in two ways.Eirst. this study identified key antecedents that are likely to influ-ence customer satisfaction and customer loyalty in online shoppingenvironments. The results showed that e-service quality (web sitedesign, reliability, security, and customer service) would not affecttheon-Iine shopping customerloyaltydirectlybut indirectly throughthe mediation of perceived value and customer satisfaction. There-fore, to enhance customer perceived value and customer satisfac-tion, online stores should start improving the design of web site,providing accurate service, strengthening the security of onlinetransactions, and helping customer to solve problems.

Second, we proposed an integrative model to explain theuser's online shopping behavior which based on established rela-tionships among e-service, quality, customer satisfaction, customerloyalty, and customer perceived value.

Mostofpast studies of online consumer behavior have focusedon the links among service quality. Although the crucial importanceof customer perceived value in the online shopping environment,previous studies have been neglected that variable, in this research,the results showed that perceived value would not only affect the

14 / The Relationships among e-Service Quality, Value, Satisfaction and Loyalty in Online Shopping

customer loyalty directly but also indirectly through the mediationof customer satisfaction. Because perceived value is conceptual-ized as the consumer's evaluation of the utility of perceived benefitsand perceived sacrifices (Zeithaml. 1988). we suggested that onlinestores should try to raise ihe benetlis (such as good, services.personnel, and image value) and reduce the sacriñces {such asmonetary, energy, time and psychic transaction costs).

LimitationsThere are several limitations of this research that should be

considered when interpreting its findings. First, replication of thisresearch in different business and sellings such as Business-to-Business in both cross-sectional and longitudinal studies could alsohelpextendthevalidityofthesefindings. Second, besides customerperceived value, funher studies might also profit form focusing ona wider range of variables, possibly exploring the effect of involve-ment, convenience orientation, and switch cost etc. In addition, amore comprehensive model might be developed. Finally, repur-chase intention and word of mouth (WOM) were integrated intocustomer loyalty. However, some studies have shown that market-ing programs can have different effects on different customerbehaviors. It would therefore be interesting to conduct furtherresearch to examine the different behaviors of customer loyalty.

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