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    Understanding the quality ofrelationships in consumer

    servicesA study in a retail environment

    Amy WongUniversitas 21 Global, Singapore, and

    Amrik S. SohalDepartment of Management, Monash University, Caulfield East, Australia

    AbstractPurpose The purpose of this study is to examine consumer perceptions of their shoppingexperience in a retail environment.

    Design/methodology/approach Based on the literature, a model of relationship strength isdeveloped and empirically tested with a sample of consumers in a chain departmental store setting inVictoria, Australia. The model investigates the effect of service quality, trust, and commitment onrelationship strength. The model then seeks to explore the impact of relationship strength onattitudinal outcomes such as relationship quality and behavioral outcomes such as customer loyalty.Interrelationships among these variables are also considered. The data are analysed using LISRELVIII as the proposed research model consists of a simultaneous system of equations having latentconstructs and multiple indicators.

    Findings Overall, the findings were consistent with hypotheses from the marketing/managementliterature. Empirical support is provided for the relationship between service quality and trust.

    Research limitations/implications Although this study found significant relationships betweenthe constructs in the research model, it should be taken into account that the levels of varianceexplained are relatively modest given the large sample size. In addition, the relationship strengthmodel was tested using a cross sectional design making casual assessments difficult.

    Originality/value The research findings could be generalized to services that share some commoncharacteristics with regard to the nature of customer relationships in the retail industry, for example,banking, accounting, and insurance services.

    KeywordsCustomer relations, Customer services quality, Trust, Customer loyalty,Retail service industries, Australia

    Paper typeResearch paper

    Introduction

    In the recent years, customer relationships have received considerable attention fromboth 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 increasedbenefits for the organization in the form of customer satisfaction, loyalty,word-of-mouth, and increased purchases. In the current literature, several differentapproaches have been used to identify these variables and to study their impact onrelational outcomes. Researchers in the area have addressed topics such as how

    The current issue and full text archive of this journal is available at

    www.emeraldinsight.com/0265-671X.htm

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    Received November 2003Revised August 2004

    International Journal of Quality &Reliability ManagementVol. 23 No. 3, 2006pp. 244-264q Emerald Group Publishing Limited0265-671XDOI 10.1108/02656710610648215

    http://www.emeraldinsight.com/0265-671X.htmhttp://www.emeraldinsight.com/0265-671X.htm
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    companies benefit from building long-term relationships (Parasuraman et al., 1991);customer motivations for maintaining relationships (Bendapudi and Berry, 1997; Shethand Parvatiyar, 1995); the role of relational bonds in the development of customerrelationships (Smith, 1998), and the relational benefits 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; Spieset al., 1997). For example, issues such as the customer-sales associate relationship(Beattyet al., 1996), the influence of retail sales training (Pettijohn and Pettijohn, 1994),and the personalization of services (Mittal and Lassar, 1996) have been addressed inprevious research. This stream of research supports the notion that thecustomer-contact employee interaction influences overall service quality (Mittal andLassar, 1996), customer satisfaction (Spieset al., 1997), customer loyalty (Beatty et al.,1996), and purchase intentions (Macintosh and Lockshin, 1997).

    Despite the growing importance and emphasis on relationship marketing, theoperationalization of this concept is still unclear. According to some authors, studies onrelationship marketing in consumer markets are still lacking (Reynolds and Beatty,1999; Sheth and Parvatiyar, 1995). In instances where research has been conducted inconsumer markets, they focused mainly on generic issues, and there has been littleconcentration on areas that are influenced by the nature of the industry or transactionconcerned (Pressey and Mathews, 2000). Besides, to date, there is a lack of studies thatexamine the various aspects of service that are vital to customer retention (Zeithaml,2000). Moreover, the different outcomes (i.e attitudinal and behavioral) of relationshipstrength are left largely unexplored in the relationship marketing literature.Furthermore, there is a lack of studies that explore the impact of factors such astrust, 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 customerloyalty, word-of-mouth behavior, and long-term customer relationship profitability)(Storbackaet al., 1994). Given the preceding discussion, a key challenge for researchersis to identify and understand how managerially controlled antecedent variables (e.g.levels of service quality delivered) can influence the nature and degree of importantrelationship marketing outcomes (e.g. overall relationship quality and customer loyaltybehaviors) (Hennig-Thurauet al., 2002).

    In view of the difficulties that underpin our understanding of relationshipmarketing in consumer markets, this study attempts to investigate consumerperceptions of relationship strength in a retail environment. In doing so, this studydevelops and tests a model of relationship strength that incorporates variables such as

    service quality, trust and commitment, and test their impact on attitudinal outcomessuch as relationship quality and behavioral outcomes such as customer loyalty. Thefocal variable of this study is on the formation of the customer-contact employeerelationship as perceived by the customer. Customer contact employees are the face ofthe firm 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, andultimately, firm performance (Sergeant and Frenkel, 2000). Therefore, by selectingrelationship 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 andthe contact employee assumes the key implementation role in creating and maintainingclose relationships with customers.

    Research hypothesesRelationship strengthRelationship strength is defined as the extent, degree, or magnitude of relationshipwhich is governed by the amount of trust and the level of commitment the customerfeels towards the individual service provider (Bove and Johnson, 1999; Shemwell andCronin, 1995). As such, this study incorporates the measure of relationship strength inits examination of the relationships that customers have with their retail salesperson aswell as the retail store. In general, a strong, deep, and intense relationship is lessvulnerable and more likely to continue in the future. Hence, the strength of acustomer-contact employee relationship will impact on the extent to which thecustomer 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 withthe organization in the near future.

    Service qualityService quality has been recognized as an important strategic retailing weapon,particularly in developing defensive marketing strategies (Fisket al., 1993). Adopting aNordic perspective, Gronroos (1984, p. 38) defines service quality as a perceived

    judgement, resulting from an evaluation process where customers compare theirexpectations with the service they perceive to have received. The author also suggeststhat service quality issues can be split into technical quality (what is done) andfunctional quality (how it is done). Gronroos (1984) further declares that the quality of aservice is dependent on two variables: expected service and perceived service, and that

    any previous experience with a service could influence the expectations of a consumer,whereas the perceived service is the result of a consumers perception of the serviceitself.

    Likewise, following an American perspective, Parasuraman et al.(1988, p. 17), basedon exploratory research to understand the construct of service quality and itsdeterminants, defined service quality as the degree of discrepancy between customersnormative expectations for the service and their perceptions of the serviceperformance. Perceived service quality is then interpreted from the differences indegree and direction between perceptions and expectations. The authors furtherdescribe service quality as consisting of dimensions such as reliability, assurance,tangibles, empathy, and responsiveness.

    Berryet al.(1988) contend that service quality has become a great differentiator and

    the most powerful competitive weapon which many leading service organizationspossess. Delivering superior quality to customers is central to the formation ofcustomer loyalty (Zeithaml, 1996); therefore, the competitive advantage of a serviceorganization is essentially determined by its ability to expand and maintain a large andloyal customer base. Similarly, Dabholkar et al.(2000) suggest that consumers tend toevaluate different dimensions related to a service and eventually, they may form aseparate overall evaluation of service quality. The dimensions of service quality thenserve as antecedents to an overall evaluation of service quality, which in turn

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    influences the strength of their customer relationship, and subsequently, theirbehavioral intentions. Subsequently, enhanced service quality is essential to theformation of strong customer relationships. Hence, the following hypotheses areadvanced:

    H1. Service quality is positively correlated with customer loyalty.

    H2. Service quality is positively correlated with relationship strength.

    TrustTrust has been defined in a variety of ways in the relationship marketing literature: asa willingness to rely on an exchange partner in whom one has confidence (Moormanet al., 1992, p. 315), and as the belief that a partners word or promise is reliable and aparty will fulfil his/her obligations in the relationship (Schurr and Ozanne, 1985,p. 940). These two definitions of trust draw on Rotters (1971, p. 444) classic view thattrust 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 definitions stress the importance of confidence on the part of the trustingpartner. Anderson and Narus (1990, p. 45) focus on the perceived outcome of trustwhen they define it as a partners belief that the other partner will perform actions thatwill result in positive outcomes, as well as not take unexpected actions that wouldresult in negative outcomes. As such, one would expect a positive outcome from apartner on whose integrity one can rely on confidently (Morgan and Hunt, 1994).

    Focusing on the retail industry, contact employees can deliver high levels of trust bycontinually demonstrating that they have the customers best interest at heart, thatthey have the skills required to meet customer needs, and that they have the ability tosolve customer problems honestly and skilfully (Beatty et al., 1996). Also, contactemployees can develop customers trust by exhibiting extensive product, merchandise

    availability, and fashion knowledge. These related factors of service quality contributeto the development of trust, and trust begins to develop as the customers experiencepositive service interactions and receive benefits from this personal interaction. Giventhe preceding discussion, the following hypothesis is proposed:

    H3. Service quality is positively correlated with trust between the serviceexchange partners.

    Gronroos (1996, p. 12) suggests that the relationship philosophy approach relieson. . .a trusting relationship with customers . . . instead of an adversarial approach tocustomers . . . . Clearly, trust is an important construct in relational exchange becauserelationships characterized by trust are so highly valued that parties will desire tocommit themselves to such relationships (Hrebiniak, 1974). To reinforce this notion,

    trust has been posited as a major determinant of relationship commitment (Achrol,1991; Delgado-Ballester and Munuera-Aleman, 2001; Miettilaand Moller, 1990; Morganand Hunt, 1994). Morgan and Hunt (1994) point out that individuals prefer trustingrelationships; as a result, the parties involved will commit themselves to theorganization as long as they enjoy trusting relationships. Sharing of information andexperiences function as ways to demonstrate trust which lead to higher levels ofcommitment 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 throughcommitment to the relationship (Blau, 1964).

    Within a retail context, when customers form high levels of trust in the salespersonand 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 itmutually satisfying and beneficial (Macintosh and Lockshin, 1997). As a result, havinga positive relationship contributes to positive relationship outcomes such as trust andintentions to continue a relationship with the salesperson and the retail store (Crosbyet al., 1990; Swan and Oliver, 1991). Subsequently, the following hypothesis isadvanced:

    H4. Trust between the exchange partners is positively correlated withcommitment.

    CommitmentIn the relationship marketing literature, commitment has been described in many

    ways. Moorman et al.(1992) define commitment as an enduring desire to maintain avalued relationship. The term valued relationship emphasized the belief thatcommitment exists only when the relationship is considered important. This implies ahigher level of obligation to make a relationship succeed and to make it mutuallysatisfying and beneficial (Gundlach et al., 1995; Morgan and Hunt, 1994). Given thehigher level of commitment among individuals who believe that they receive morevalue from a relationship, highly committed customers should be willing to reciprocateeffort on behalf of a firm due to past benefits received (Mowdayet al., 1982). This viewis consistent with Dwyeret al.s (1987, p. 19) definition of commitment in a buyer-sellerrelationship as the existence of an implicit or explicit pledge of relational continuitybetween exchange partners. In this context, the authors suggest that commitmentimplies a willingness to make short-term sacrifices to realise longer-term benefits.

    Within the literature on channels research, commitment has been conceptualized interms of a temporal dimension, focusing on the fact that commitment becomesmeaningful only when it develops consistently over time (Moorman et al., 1992). Inaddition, commitment has also been operationalized as a channel members intention tocontinue the relationship (Anderson and Weitz, 1989; Scheer and Stern, 1992).Committed partners are willing to invest in valuable assets specific 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 andcost of continually seeking and consummating new exchanges, hence contributing tostronger relationships. Similarly, Kumar et al. (1994) use intention to stay in therelationship as an important desirable consequence of commitment that has a direct

    impact on supplier-customer relationships. Intention to stay reflects the customersmotivation to continue the relationship. Therefore, in view of the literature, thefollowing hypothesis is proposed:

    H5. Commitment is positively correlated with relationship strength.

    Relationship qualityRelationship quality has been discussed as a bundle of intangible values whichaugments products or services and results in an expected interchange between buyers

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    and sellers (Levitt, 1986). In general, relationship quality describes the overall depthand climate of a relationship (Johnson, 1999). Relationship quality also refers to acustomers perceptions of how well the whole relationship fulfils 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 customerhas concerning the whole relationship including different transactions. Hence, thefollowing hypothesis is forwarded:

    H6. Relationship strength is positively correlated with relationship quality.

    Gummesson (1987) identifies two dimensions of relationship quality in the serviceinterface: professional relations and social relations. The former relationship isgrounded on the service providers demonstration of competence, while the latter isbased on the efficacy of the service providers social interaction with the customer.Subsequently, Holmlund (2001) suggests that there are three different types of contentof quality perceptions in a business relationship, namely the technical, social, andeconomic aspects. The technical aspect relates to the offering at the core in arelationship, while the social aspect relates to the different types of social interactionson an individual and a company level. Finally, the economic aspect relates to costs andbenefits.

    The general consensus among researchers such as Crosbyet al. (1990) and Dwyerand Oh (1987) is that relationship quality is a higher order construct made of severaldistinct, though related dimensions. Specifically, Dwyer and Oh (1987) indicates thathigh levels of satisfaction, trust, and minimal opportunism distinguish qualityrelationships from non-quality relationships. Crosby et al. (1990) studied variousaspects of relationship quality, and perceive it as a higher order construct consisting asa buyers trust in a salesperson and satisfaction in the relationship. Hence, highrelationship quality implies that the customer is able to rely on the service providers

    integrity and has confidence in the service providers future performance because thelevel of past performance has been consistently satisfactory. To further exemplify thisview, research conducted by Bejou et al. (1996) concludes that customer-salespersonrelationship 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 loyaltyWithin the relationship marketing literature, loyalty has been referred to as a favorableattitude towards a brand in addition to purchasing it repeatedly (Day, 1969);a relationship between relative attitude towards an entity and repeat patronagebehavior (Dick and Basu, 1994); a situation when repeat purchase behavior isaccompanied by a psychological bond (Jarvis and Wilcox, 1977); and repeat purchaseintentions 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 providingreferences and publicity (Bowen and Shoemaker, 1998). Loyal customers are less likelyto switch to a competitor due to a given price inducement, and these customers makemore 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 packagegoods (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) andrepresents 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 businesssuccess (Rust and Zahorik, 1993), and building a relationship with a customer is a goodway to retain loyal customers in the long-term (Sheaves and Barnes, 1996). To furtherreinforce this stance, a study conducted by Barnes (1997) suggested that it is unlikelythat customers may be retained, often for very long periods, without a genuinerelationship being present. Therefore, the following hypothesis is proposed:

    H8. Relationship strength is positively correlated with customer loyalty.

    Research modelFigure 1 depicts the relationship strength model that is advanced based on theliterature. The major constructs in the model include service quality, trust,commitment, relationship strength, relationship quality, and customer loyalty, andthe 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 serviceexchange partners.

    H4. Trust between the exchange partners is positively correlated withcommitment.

    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 reflects the effects of service quality,trust, and commitment in predicting relationship strength. Indeed, an enhanced level ofservice quality will contribute to greater feelings of trust and commitment, which areelements essential to the formation of strong customer relationships. In addition, theincorporation of outcomes variables such as relationship quality (affect based) andcustomer loyalty (action based) can provide added insight into the nature and degree ofrelationship marketing outcomes. Subsequently, attention now turns to discussion ofthe research method used to test these hypotheses.

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    Research method

    Research setting, data collection and sampleFor data collection purposes, the mall intercept technique was used on shoppers whowere leaving a large chain departmental store in Victoria, Australia. These shoppershave previously shopped at the retail store; therefore, they have developed arelationship with the store (de Ruyter and Wetzels, 1997). The characteristics of a chaindepartmental store make it a suitable choice for testing of the hypotheses. First, a chaindepartmental store was chosen because of the high degree of in-store browsing.Second, situational variables (e.g. geographic distance) played a less critical role indetermining customer attitude and patronage behavior as opposed to supermarkets orconvenience stores. In addition, customers from a variety of segments commonly visitdepartment stores, in contrast to certain high priced specialty stores. Finally, the choiceof a department store guaranteed variation in terms of products, services, and brands.

    Data was collected at eight different stores using a structured questionnaire withquestions in a prearranged order. The questionnaires containing the measures,accompanied by a cover letter with a university letterhead, were administered duringpeak hours, over a four-day period, from Wednesday to Saturday, for eight weeks (oneweek dedicated to each store). The cover letter explained the purpose of the study,assured confidentiality of data, and thanked the participant. As an initial screeningquestion, shoppers were asked whether they have previously shopped at the retailstore. Consequently, shoppers who have previously shopped at the retail store have

    Figure 1.A conceptual model of

    relationship strength

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    developed a relationship with the store (de Ruyter and Wetzels, 1997). The researcherapproached every third adult shopper leaving the retail store, asked whether he or shewill participate in the study, and recorded all refusals. The questionnaires wereadministered 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 theyaccomplish their purpose for being at the store. The questionnaires wereself-administered by interested participants who were provided a chair in a quietarea near the store exit and a clipboard for their convenience while completing thequestionnaires. These participants were also informed of further assistance availablefrom the researcher for clarification of questions.

    Shoppers were also given the choice to take away the questionnaire and complete itin their own time. To increase the response rate of the questionnaires, shoppers whochose the latter option were given a reply paid return envelope, so that the respondentsincurred no additional costs. Besides, the respondents were advised to return thequestionnaire within a ten-day period. Following this data collection procedure, a total

    of 1,261 usable questionnaires were collected. Specifically, a response rate of 45.5percent was generated via in-store survey administration while a response rate of 37.2percent was achieved via reply paid mail. The main reason why shoppers elected not toparticipate in the study is due to the lack of time. In this case, non-response bias waschecked by comparing the responses of the early respondents to the late respondents.Comparisons revealed no significant differences between groups.

    The participants of this study were predominantly females (87 percent). Of therespondents, 25 percent had a household income of between $40,001 to $60,000, andmost of the respondents were aged between 41 to 50 years of age. Some of therespondents, 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 FlyBuy 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 inthe past 12 months. Interestingly, 62 percent of the sample has shopped at the store formore than ten years, and this further reinforces the fact that shoppers have previouslyshopped at the store and have developed a relationship with the store.

    MeasuresAll measures used in this study were estimated on seven point Likert scales.

    Service quality.Following the work of Dabholkar et al. (2000), service quality wasmeasured using four Likert scale items, i.e in terms of service delivery, retail storeXYZ: 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 identified by Morgan and Hunt (1994):

    the employees of retail store XYZ can be trusted at all times; retail store XYZ can becounted on to do what is right, and the employees of retail store XYZ have highintegrity.

    Commitment. Commitment was measured using three items from a commitmentscale developed by Morgan and Hunt (1994): I am very committed to maintain myrelationship with the employees of retail store XYZ; my relationship with the

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    employees of retail store XYZ is very important to me, and I plan to maintain myrelationship with the employees of retail store XYZ.

    Relationship strength. Relationship strength was assessed using four items in thisstudy. 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 theconcept of a closeness gap as suggested by Barnes (1997), respondents were also askedto evaluate how close they would like the relationship to be. By rating the strength oftheir 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. Althoughseveral 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), thesedimensions are measuring sources related to relationship quality, and they do not formpart of the construct. Hence, to operationalize relationship quality, respondents wereasked to state their overall assessment of the quality of their relationship with thecontact employee as well as with the company.

    Customer loyalty.Four items adopted from the Reconfigured Behavioral IntentionsBattery (Parasuraman et al., 1994) were used to measure customer loyalty: I saypositive things about retail store XYZ to other people; I recommend retail store XYZto someone who seeks my advice; I encourage friends and relatives to shop at retailstore XYZ, and I consider retail store XYZ as my first choice in the next few years.

    Validity and reliability of measuresBefore testing the hypothesized relationships in the relationship strength model, thescales used to operationalize the constructs were examined through the estimation ofthe measurement model (Anderson and Gerbing, 1988). Confirmatory factor analysis

    (CFA) was used to assess the unidimensionality and validity of the constructs. Theresulting measurement model x2155 was 1866.86, p 0:000. To determine reliability,the Cronbachs (1951) coefficient alpha was used to separately assess the reliability ofthe scales adopted in this study. All composite reliabilities for the multi-item scaleswere above 0.87. All of the loadings in the model were significant (see Table I).

    Discriminant validity was evaluated by testing whether pairs of construct werecorrelated less than unity. The chi-square difference test with one degree of freedomwas used to test for unity between the constructs. All tests were significant at the onepercent significance level. Inspection of the correlation matrix and the respectivestandard errors reveals that none of the correlations are within two standard errors of1.0. Therefore, there was evidence for discriminant validity for the constructs used inthis study. Applying Fornell and Larckers (1981) test of average trait variance

    extracted, all the constructs pairs demonstrate that the average variance extractedfrom the traits exceeds the squared correlation estimate between the two constructs.

    Having established adequate validity and reliability, the findings weresubsequently analysed using SPSS version 10 and LISREL VIII.

    ResultsTable II presents the scale means, standard deviations, and correlations for the studyvariables. An examination of the pair-wise correlations among the variables provides

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    Item/constructStandardized

    loading T-valueCompositereliability

    Overall service quality 0.96

    In terms of service delivery, retail store XYZ:Has an excellent overall service 0.95 45.09Has a service of very high quality 0.96 46.46Provides a high standard of service 0.95 45.57Delivers superior service in every way 0.90 41.51

    Trust 0.87In terms of my experience with retail store XYZ:The employees of retail store XYZ can be trusted at alltimes

    0.83 35.14

    Retail store XYZ can be counted on to do what is right 0.83 35.46The employees of retail store XYZ have high integrity 0.89 38.96

    Commitment 0.91

    In terms of my experience with retail store XYZ:I am very committed to maintain my relationship withthe employees of retail store XYZ

    0.87 38.33

    My relationship with the employees of retail store XYZis very important to me

    0.90 40.59

    I plan to maintain my relationship with the employeesof retail store XYZ

    0.94 43.92

    Customer loyalty 0.92In terms of my loyalty to retail store XYZ:I say positive things about retail store XYZ to otherpeople

    0.83 35.81

    I recommend retail store XYZ to someone who seeksmy advice

    0.93 43.42

    I encourage friends and relatives to shop at retail storeXYZ 0.94 44.40

    I consider retail store XYZ my first choice in the nextfew years

    0.84 36.57

    Relationship strength 0.90Relationship with the employees of retail store XYZ:What is your overall assessment of the strength of yourrelationship with the employees at retail store XYZ?

    0.86 38.10

    How strong would you like the strength of yourrelationship with the employees at retail store XYZ tobe?

    0.79 33.05

    Relationship with retail store XYZ:What is your overall assessment of the strength of your

    relationship with retail store XYZ?

    0.91 41.43

    How strong would you like the strength of yourrelationship with retail store XYZ to be?

    0.82 34.82

    Relationship quality 0.90What is your overall assessment of the quality of yourrelationship with the employees at retail store XYZ?

    0.87 37.88

    What is your overall assessment of the quality of yourrelationship with retail store XYZ?

    0.88 38.68Table I.Item measurementproperties

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    preliminary support for the hypotheses. The pair-wise correlations also revealsignificant and positive relationships among the independent variables as expected.

    Following measurement purification, the path relationships within the relationshipstrength model were analyzed by structural equation modelling (SEM) using LISREL

    VIII (Joreskog and Sorbom, 1996). In this instance, LISREL VIII was used for dataanalysis as the proposed research model consists of a simultaneous system ofequations having latent constructs and multiple indicators. The fit indices of theresearch model shown in Figure 2 are acceptable x2 1966:31; df162;p , 0:001;GFI0:95; CFI0:96; NFI0:96;RMSEA 0:09;SRMR 0:03:

    Given the relatively large sample size n 1; 261; unnormalized and normalizedincremental fit indices (IFI) suggested by Bentler and Bonnett (1980) were computed todemonstrate 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 fit for models with largesamples. The unnormalized and normalized IFI for the model are 0.96 each. The resultsof 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 significantly and positively related to customer loyaltyH1 0:28; t 10:98 and relationship strength H2 0:18; t7:46. Hence,support is provided for these two hypotheses despite their relatively low standardizedcoefficients. The SEM results also provide support for H3-H6, with relatively highstandardized coefficients ranging from 0.67 to 0.87. With regard to the effects ofrelationship quality and customer loyalty, the SEM results provide support for thehypothesized relationship H7 0:47; t2:29. Finally, no support is provided forH8 H8 0:12; t0:54. One reason for the insignificant relationship betweenrelationship strength and customer loyalty could be due to the role of relationshipquality in predicting customer loyalty. Furthermore, the high standardized coefficientbetween relationship strength and relationship quality suggests the mediating role ofrelationship quality between relationship strength and customer loyalty.

    DiscussionThis study affords further insight into the effects of service quality. The findings implythat service quality related factors such as being consistently courteous to customers,instilling confidence in customers, having the knowledge to answer customersenquires, and having the ability to handle customer complaints assist in theestablishment of higher levels of trust. This provides empirical support for therelationship between service quality and trust. In addition, this study demonstrates

    Variable Mean SD 1 2 3 4 5 6

    1. Service quality 4.88 0.892. Trust 4.71 0.87 0.7583. Commitment 4.17 1.27 0.615 0.6884. Relationship strength 3.99 1.26 0.533 0.554 0.7175. Relationship quality 4.31 1.23 0.553 0.575 0.686 0.8026. Customer loyalty 4.25 0.77 0.586 0.641 0.753 0.615 0.628

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

    Table II.Means, standard

    deviations, andcorrelations

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    Figure 2.A model of relationship

    strength (n 1,261)

    Parameter DescriptionStandardized

    estimates t-valuesHypothesissupported

    H1 Service quality ! customer loyalty 0.28 10.98 * * Yes

    H2 Service quality ! relationship strength 0.18 7.46 * * YesH3 Service quality ! trust 0.77 23.23 * * YesH4 Trust ! commitment 0.73 20.66 * * YesH5 Commitment ! relationship strength 0.67 19.64 * * YesH6 Relationship strength ! relationship quality 0.87 27.51 * * YesH7 Relationship quality ! customer loyalty 0.47 2.29 * YesH8 Relationship strength ! customer loyalty 0.12 0.54 No

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

    Table III.Parameter estimates forthe research model

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    that in order to establish and maintain long-term customer relationships, retail firmsneed to focus on improving their level of service quality, especially in the provision ofservice quality factors relating to the caring and individualized attention that a serviceprovider 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 andcommitment that the customer feels towards the service provider or the service firm.Previous research has posited trust as a major determinant of relationship commitment(Achrol, 1991; Delgado-Ballester and Munuera-Aleman, 2001; Miettila and Moller,1990; Morgan and Hunt, 1994). The results of this study show that trust contributespositively to commitment. Specifically, the behaviors and attributes of employeesinfluence customers satisfaction with their shopping experiences and their level oftrust in the employees (Kennedy et al., 2001). Indeed, factors of trust relating toemployees who can be relied on to keep their promises, employees who are sincere andhonest, employees who put the customers interests before their own, and employeeswho 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 customersand the retail stores understanding of its customers contribute to the establishment ofcustomer commitment. All these factors of trust are a precondition for increasedcustomer commitment.

    Consequently, this study supports the notion that commitment is essential to thedevelopment and maintenance of strong customer relationships. Hence, relationshipmarketing programs directed towards high relational customers should focus onbuilding and maintaining customer commitment. One way to achieve high levels ofcustomer commitment is to ensure that retailers recruit employees who like to interactwith customers and are willing to base their customer relationships on repeated

    interactions built on the concept of commitment (Beatty et al., 1996). Besides, retailfirms should screen their sales personnel carefully to ensure a good job fit that willcontribute to the establishment and maintenance of strong customer-salespersonrelationships. This screening can be done via relevant personal histories and throughthe use of interpersonal role-playing situations within the interview environment(Crosbyet al., 1990). Furthermore, when hiring contact employees, firms should screenapplicants for the social abilities that facilitate establishing and maintaining long-termrelationships based on the concepts of trust and commitment. To reinforce theseefforts, trust and commitment-building activities on the part of all employees should beencouraged and taught. For example, employee team exercises aimed at improvingservice delivery standards, joint problem identification, analysis of customercomplaints, 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 todevelop and nurture relationships with customers. Since customer trust andcommitment appear to be such important factors in determining the strength ofcustomer relationships, training focusing on enhancing customer trust andcommitment would be particularly beneficial. For example, employees should betrained 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 ofimportant dates should be emphasized in training sessions. Case studies on handling

    complex customer requests may be used to demonstrate problem solving and decisionmaking skills. In addition, ongoing training in extensive and up-to-date merchandiseknowledge is extremely essential.

    This study suggests that retail managers need to consider not only the quality of theservice they provide, but also the quality of customer relationships. As such, retailmanagers can use the relationship quality scale proposed in this study to monitor thequality of their customers relationships with them, as well as the effectiveness of theirrelationship marketing programs aimed at building customer relationships. Thiscustomer relationship assessment tool can provide feedback as to how the quality oftheir customer relationships is changing in response to managerial actions andimplementation of strategies. In order to encourage the development of relationshipsbetween customers and employees, retail firms should implement effective ways ofrewarding customers for developing interpersonal relationships with employees. Assuch retail firms might even point out to their customers the benefits of knowing aspecific person within the organization. To do this, retail firms can make use ofdatabase capabilities to reward their loyal customers. Despite this, extra care must beexhibited in placing too much emphasis on developing relationships with customers, asnot 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 alternativemethods such as providing customers with the option of user friendly and functionalself-service technologies, or providing customers with the option of on-line interactiveinformation as well as online purchasing of the retail firms products and services.

    To this end, the challenge for retail managers is to be adept in applying therelationship strength model to their businesses. The model will serve managers well ifit is used as a diagnostic tool to evaluate the links between the constructs, rather thanas a model which a priori explains those links. Specifically, managers have to test themodel in their particular business context and conduct the analysis of the datathemselves in order to see whether the links do actually relate to their businessesenvironment. The organizations competitive strategy and management philosophycan then be developed on the basis of this analysis. More importantly, theorganizations strategic vision must be communicated to employees and this must be inline 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 ofservice quality, trust, and commitment on relationship strength. A model ofrelationship strength was proposed. This model explored the impact of relationshipstrength on attitudinal outcomes such as perceived relationship quality and behavioraloutcomes such as customer loyalty. Overall, the findings were consistent withhypotheses from the services marketing/management literature.

    As with any research, care should be taken when generalizing the results of thestudy. Although this study found significant relationships between the constructs in

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    the research model, it should be taken into account that the levels of variance explainedare relatively modest given the large sample size. In addition, the relationship strengthmodel was tested using a cross sectional design making casual assessments difficult.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 affectingrelationship strength, it is possible that additional constructs could moderate therelationships proposed within the relationship strength model. Some potentialmoderators include the physical surroundings or atmosphere of the serviceenvironment, the role of other customers (former, present, and future) in therelationship development process, the internal service quality and service culture of theorganization, as well as the gender and demographic makeup of the service provider.Investigation of various moderating variables in the relationship strength model couldbe done by exploring a multitude of contexts and thus obtaining considerate variabilityacross such variables.

    In addition, the findings of this study are confined to the retail chain departmentalstore sector in Victoria, Australia, thus the effects of extraneous variables based onindustry or cross-cultural differences may limit its potential generalizability to otherservice-oriented industries. As such, generalizability would be enhanced byreplications of the findings across various industries and countries. In order toapply the model to extended service settings or to a cross-cultural context, there is aneed for further customization of the measurement scales used in this study. However,despite this caveat, the research findings could be generalized to services that sharesome common characteristics with regard to the nature of customer relationships in theretail industry. For example, the relationship strength model proposed and tested inthis study might be applicable to services that reflect 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 personalrelationship between the customer and the contact employee is often more essentialrelative to other aspects of the service than it is in services such as cable television orutilities service. It is integral that future comparative studies also investigate multiplefirms within each service type to provide an assessment of the differences/similaritiesthat exists across service types.

    As discussed previously, the proposed relationship strength model is not expectedto 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 directlyapplicable in these situations, confirmation of the expected appropriateness of themodel in such contexts is needed. Consequently, deregulation in these industries isexpected to continue, and customers may soon have a range of service providers tochoose from. Therefore, examination of such services may also provide direction as tohow loyalty can be cultivated among customers who previously had no choice, in orderto encourage them to remain with the service provider.

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

    competitors.

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    Ajzen, I. and Fishbein, M. (1980), Understanding Attitudes and Predicting Social Behavior,Prentice-Hall, Englewood Cliffs, NJ.

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    About the authorsAmy Wong is Assistant Professor at Universitas 21 Global, Singapore.

    Amrik S. Sohal is Professor and Associate Dean in the Department of Management, MonashUniversity, Caulfield East, Australia. Amrik S. Sohal is the corresponding author and can becontacted at: [email protected]

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