Situational Characteristics as Moderators of the

Satisfaction-Loyalty LinkAn Investigation in a Business-to-Business Context

Florian v. WangenheimUniversity of Dortmund

In business, the relationship between satisfaction and loyalty is of fundamental importance.

A study of 425 European businesses was conducted with results showing that the relationship between them is dependent on different contextual factors.

When analysing the results, they pointed towards focusing on specific customer groups as opposed to the price of the product.

Overview

It is assumed that higher levels of loyalty equate to higher levels of success in the marketplace.

Evaluating what it is to be a loyal customer (if dependent on satisfaction) proves to be challenging as we need to understand the asymmetries between them.

It is possible to infer that differences do occur between the satisfaction-loyalty link and from this; it may be possible to segment customer groups accordingly.

Overview

A strong desire for a business to business application of such research is called on to confirm such findings.

In the paper, hypotheses in the business to business market are tried and tested and further elucidation of their results show some interesting indications.

Overview

Overview of the Hypotheses

H1: The more satisfied a customer is, the higher her/ his loyalty will be.

H2: The relationship between satisfaction and loyalty is stronger when perceived purchase

importance is high. H3: The relationship between satisfaction and loyalty is

weaker when perceived purchase uncertainty is high.

H4: The relationship between satisfaction and loyalty is weaker when switching costs are high.

H5: The relationship between satisfaction and loyalty is stronger for old than for new customers.

Positive relationship Loyalty: “deeply held commitment to rebuy a

preferred product or service in the future” (Oliver, 1997).

Loyalty is based upon relationships. Relationship Satisfaction View (Kelley, 1959) believes

that satisfying experiences increase the motivation for customers to remain in a purchasing relationships.

Expectations of future costs and benefits are also influenced by these prior experiences in this relationship.

Satisfaction and Loyalty

Satisfaction Loyalty

Perceived Purchase Importance

Product Importance: “the buyer’s perception of the significance of the buying

decision.” (Bunn, 1993)

“The buyer will take into consideration the future impact of the purchase to the functioning

firm.” (Bunn, 1993)

Strong Purchase Importance

Small Differences in Expected and Actual Levels of Performance being Noticed

Bigger Chance of Product Termination due to Trust being Broken

Perceived Purchase Importance

When perceived purchase importance is taken into account, the relationship between satisfaction and loyalty may be even stronger.

High Perceived Importance

More Thorough Research

Better Information on the Product/Service

High Degree of Purchase Uncertainty

Low Commitment of the Customers

Low Resistance to Marketing Efforts and Price Tactics of Competitiors

Perceived Purchase Uncertainty

Even if the degree of the customer satisfaction is high, the customer loyalty tends to be lower if the customers feel uncertain about the quality of the product/service

Switching Costs

Transaction-Specific Investments

Switching Suppliers Strongly Inhibited

In case of dissatisfaction, high switching costs can still outweigh switching benefits.

Duration of Customer Relationship

DURATION = LOYALTY Duration of business relationship

ONLY as a behavioral variable Independent of attitudinal loyalty

?

Duration of Customer Relationship

New Customers VS. Old Customers

Driven by the “newness” of the

situationTransactional

Low satisfaction-retention link

Rely on past experiencesRelational

Stronger satisfaction-retention link

Cumulative TIME rather than one-time satisfying experience

satisfaction

loyalty

Duration of Customer Relationship

Hypothesis 5:

“The relationship between satisfaction and loyalty is stronger for old than for new customers.”

German Market for Industrial Energy Design Necessary service Buying decisions reviewed by a single person Recent liberalization of German energy market

Trained interviewers conducted the survey via telephone (total of 418 questionnaires)

Samples randomly drawn

Research Method

Research Method

Scales from previous researches were used Measuring customer satisfaction and customer

loyalty

Results and Discussion

Satisfaction = Loyalty

HYPOTHESIS 1: STRONGLY SUPPORTEDSatisfaction exhibits positive, statistically

significant influence on both types of loyalty.

HYPOTHESIS 2: PARTIALLY SUPPORTED High Purchase Importance stronger

relationship between satisfaction and active loyalty.

No significant findings for passive loyalty. HYPOTHESIS 3: PARTIALLY SUPPORTED

High Purchase Uncertainty weaker relationship between satisfaction and passive loyalty.

No significant findings for active loyalty.

Results and Discussion

HYPOTHESIS 4: PARTIALLY SUPPORTED High Rate of Switching Costs weaker

relationship between satisfaction and active loyalty.

No significant findings for passive loyalty. HYPOTHESIS 5: FULLY SUPPORTED

Effect on old customers > effect on new customers

Results and Discussion

Managerial Implications

Long term relationships customers Investing in service quality and increasing

satisfaction will increase retention rates and loyalty behavior

New customers Investing in service quality and increasing satisfaction

must be based on a careful cost-benefit analysis, as they are more likely to defect, since high satisfaction is not a strong predictor of retention for them.

The effect of satisfaction is stronger on active than passive loyalty.

Limitations and Future Research

Limitations Not generalizable as

the sample was limited to one industry and one country.

Some hypotheses were not confirmed.

Future research Test if the effect could

be confirmed in other industries.

Thank you for listening!