Service quality and customerretention: building long-term

relationshipsKarin A. Venetis

Vrije Universiteit Amsterdam, Amsterdam, The Netherlands

Pervez N. GhauriManchester Business School, The University of Manchester, Manchester, UK

Keywords Customer services quality, Customer retention, Business-to-business marketing

Abstract The study extends the existing knowledge by taking a relationship perspective to studythe effect of service quality on customer retention. We integrate business-to-business marketingliterature with service quality literature to develop a model to capture relationship commitment andother influencing factors. The model is improved with help of semi-structured interviews which islater tested through a survey of 241 companies in the advertising sector. Findings indicate thatservice quality indeed contributes to the long-term relationships and customer retention.

IntroductionThe quality of services is considered to be a critical success factor for contemporaryservice companies. Service quality’s close conceptual as well as empirical link tocustomer satisfaction turned it into the core marketing instrument, making it the mostresearched area in services marketing (Fisk et al., 1995; Bolton et al., 2000). In addition,the accumulated research has linked positively with profitability (Fornell, 1992). Thislink, however, is not straightforward (Rust et al., 1995; Zeithaml et al., 1996). Thecontribution of service quality to profitability is generally explained by two underlyingprocesses. First, service quality is regarded as one of the few means for servicedifferentiation and competitive advantage which attracts new customers andcontributes to the market share. Second, service quality is viewed as an importantmeans for customer retention.

It has been argued that service excellence enhances customers’ inclination to buyagain, to buy more, to buy other services, to become less price sensitive, and to tellothers about their positive experiences (Anderson and Fornell, 1994; Anderson et al.,1994; Rust et al., 1995; Zeithaml et al., 1996; Bolton et al., 2000). Empirically thisassumption is supported by several studies that consistently find a positive impact ofservice quality on customers’ behavioral intentions. Bitner (1990), Bolton and Drew(1991), Boulding et al. (1993) and Cronin and Taylor (1994) find that service quality hasa positive impact on customer’s repurchase intentions and intentions to recommend thecompany to others. The most comprehensive study in this field, by Zeithaml et al.(1996), determines that service quality influences different intentions, such as givingrecommendations, doing more business, and willingness to pay more.

Our study focuses on the contribution of service quality to customer retention. Weextend the existing knowledge by taking a relationship perspective to study the effectof service quality on customer retention. Generally, using behavioral intentions as ameasure for customer retention implies a transaction perspective on customer

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European Journal of MarketingVol. 38 No. 11/12, 2004

pp. 1577-1598q Emerald Group Publishing Limited

0309-0566DOI 10.1108/03090560410560254

retention. However, the mere intention of a customer to remain or leave does not predictvery well whether the relationship is maintained in the long term.

Long-term customer retention and long-term relationships with customers producea number of important benefits. Over time, exchange efficiencies can be createdbetween the parties and effectiveness can be increased. In other words, better qualitycan be delivered at lower transaction costs (Heide and John, 1992). The relationshipparadigm has entered the services marketing literature as well (Gronroos, 1993, 2000;Berry, 1995), and authors argue that service quality not only affects subsequent servicetransactions, but also enhances the building and maintenance of long-term customerrelationships (Rust and Zahorik, 1993; Anderson and Fornell, 1994; Harris et al., 2003).When customers perceive that they are receiving better quality service for their money,they believe they are receiving “good value”, which increases their loyalty to theservice provider (Bolton et al., 2000). Empirically, however, very little research has beenconducted to study the effects of service quality on the maintenance of long-termrelationships.

In business-to-business marketing, on the other hand, the establishment andmaintenance of long-term business relationships has been studied for much longer.From this literature it becomes clear that relationships are not static but dynamicphenomena, and that the context and history of the relationships are importantdeterminants for the future of the relationships (Ford, 1990; Halinen, 1996; Ghauri,1999). Research has shown that service quality has a strong effect on the potential startof a relationship: it has a positive effect on customers’ repurchase intentions (loyalty),which leads to more interactions and/or transactions. Whether these transactionsaccumulate into a strong long-term relationship remains to be studied, and is the focusof our research.

We integrate business-to-business marketing literature with the service qualityliterature to answer the following questions: Does service quality contribute to thebuilding and enhancement of long-term customer relationships? If so, what is itsrelative contribution next to other (relationship) factors? This research contributes toexisting literature in the following ways.

It provides empirical evidence for the generally assumed positive effect of servicequality on the establishment and enhancement of long-term customer relationships(Anderson and Fornell, 1994; Patterson, 1995; Rust and Zahorik, 1993; Bolton andLemon, 1999).

It extends the service quality literature by integrating it with business-to-businessmarketing literature. Liljander and Strandvik (1995) developed a model for consumerservice relationships in which they used theories from business-to-business marketingliterature. However, this model was not explored empirically. In business-to-businessmarketing, several authors have investigated business services relationships (Halinen,1996; LaBahn and Kohli, 1997), but they have not used the service quality concept inthe manner as it is used in services marketing. We thus aim to extend the servicequality literature in two ways:

(1) identify and explore the conceptualization of long-term customer-relationshipmaintenance that differs from a mere transactional relationship; and

(2) identify and explore other factors that contribute to the establishment andmaintenance of customer service relationships.

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In this manner, we extend the knowledge of service quality’s influence from absolutecontribution of service quality to its relative contribution (relative to other factors). Thisenables us to develop a model portraying the factors that influence long-term businessrelationships. This model is then empirically tested and discussed before drawingconclusions in the final part of this paper.

Theoretical backgroundLong-term relationshipsLong-term business relationships are beneficial to both parties involved (Berry, 1995;Szmigin, 1993; Bolton et al., 2000). From the provider’s point of view, theserelationships create barriers against competition, decrease price competition, andgenerate more revenue per customer with decreasing costs. According to the PIMSstudies, in some service industries the retention of 5 per cent of the currentcustomer-base can have a profit impact as large as 125 per cent (Reichheld and Sasser,1990; see also Reinartz and Kumar 2000, 2003 for the latest research on this topic).In business marketing literature, different kinds of relationships are identified, rangingfrom transactional relationships to relational exchange relationships ( Jackson, 1985;Dwyer et al., 1987; Ghauri, 1999). In pure transactional relationships the customerprimarily buys on the basis of price, uses multiple sources of supply, and tends toswitch suppliers frequently over time. Relational exchange relationships, on the otherhand, emerge when the buyer and supplier develop a relationship with a morelong-term orientation. Continuity is the key element of relational exchange, which doesnot necessarily mean that the exchange events are frequent or repeated but thatrelationship exists and is maintained.

The fact that relationships are more than a mere sequence of transactions over timecan be illustrated by some of the existing relationships in business services markets.Many accountancy, legal and advertising agencies have rather lengthy relationshipswith their customers (see, for example, Harris et al., 2003). The mere presence of a seriesof transactions does not mean that a “real” relationship is created. The establishment ofa relationship is not signalled only by the (intended) behavior, but more so by thereason why the behavior occurs, i.e. the attitudes and motivations that underlie theintentions (Dwyer et al., 1987).

Sharma (1994) and Yorke (1990), writing about business service relationships,conclude that relationships go through several stages before they can be calledlong-term. Although each author emphasises different processes that occur at eachstage, they agree on the outcome that characterises the last stage: the degree ofrelationship commitment that has been established between the partners:

Customer retention implies a long-term commitment on the part of the customer and the firmto maintain the relationship. The development of the mutual commitment is the same processas creating long term buyer-seller relationships (Wilson, 1995, p. 8).

Commitment is regarded as the central outcome variable in business relationships,which ensures the strength, stability, durability, and even profitability of a relationship(Dwyer et al., 1987; Moorman et al., 1992; Morgan and Hunt, 1994;). Since a partner’srelationship commitment is not built overnight, it is a good measure that reflects the“ongoing process” of the relationship. If behavioral intentions do not stem from a

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certain degree of commitment, they indicate a transactional relationship rather than along-term co-operative one.

Relationship commitment is thus the crucial variable that determines the long-termretention of customers. Although service quality is assumed to be positively related tothe retention of customers, little is known about its effect on customers’ relationshipcommitment. Commitment is a dynamic concept, and the link between service qualityand customers’ commitment might not be straightforward. Even thoughbusiness-to-business marketing literature does not study the concept of servicequality, it addresses the comparable concept of satisfaction. In services marketing,service quality is defined from a customer-based perspective (cf. Parasuraman et al.,1985; Gronroos, 1984), i.e. quality is what the customer perceives as quality, and it isgenerally defined as the (dis)confirmation of customers’ service expectations. Thisconceptualisation makes it very similar to the conceptualisation of customersatisfaction which is also based on the disconfirmation principle. Some authors use thetwo concepts as synonyms (see, for example, Iaccobucci et al., 1994), althoughconceptual differences do exist (for a detailed discussion see Oliver, 1993). Customersatisfaction does not have a direct positive link to customer retention. Reichheld (1993)found that even satisfied customers can switch relationships. Dissatisfied customersdo not necessarily leave, and satisfied customers do not necessarily stay in arelationship. Even though it has been indisputably shown that service qualitycontributes significantly to the start of a relationship, we will determine whetherquality also contributes to relationship maintenance, next to other factors that havebeen proposed and found to influence relationship commitment.

Relationship commitmentSeveral definitions have been proposed that reflect different aspects of the commitmentconcept. Some stress its behavioral dimension, an explicit or implicit intention tocontinue the relationship (Dwyer et al., 1987; Moorman et al., 1992), whereas othersrefer to attitudes, for example, a desire for a stable relationship, a willingness to makeshort-term sacrifices for the sake of maintaining the relationship, and belief inrelationship stability (Anderson and Weitz, 1992; Morgan and Hunt, 1994). Some defineit as a perception of the interdependence of outcomes where both a partner’s outcomesand joint outcomes are expected to benefit the party in the long run (Ganesan, 1994).Others define commitment as an affective disposition that reflects the desire of theparties to maintain the relationship and willingness to devote considerable effort to it(Morgan and Hunt, 1994; Anderson and Weitz, 1992).

Despite the diversity, all definitions refer to the likelihood of relationshipcontinuation in the future. Therefore, we define relationship commitment as a partner’sintentional continuation of a business relationship. This definition not only refers to aparty’s future intentions, but also to the deliberateness of these intentions, which isexactly what makes a committed relationship different from a mere transactional one.It reflects the attitude and specific motivations that underlie a party’s intentions.

Different motivations can underlie a partner’s intentions to continue therelationship. Kumar et al. (1994) and Geyskens et al. (1996) define these intentions asdifferent dimensions of relationship commitment. They distinguish between twocommitment dimensions: affective and calculative commitment. Affective commitmentis defined as a desire to continue the relationship because it is enjoyed for its own sake,

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not taking into account its instrumental worth. A sense of loyalty and belongingnessalso plays a role. Calculative commitment refers to a more instrumental type ofcommitment, and is defined as the extent of the need to maintain a relationship due tosignificant perceived termination or switching costs. It is a calculation of costs andbenefits, including investments and available alternatives to replace or make-up forforegone investment. This is close to Moorman et al.’s (1992) suggestion thatcommitment is enduring and reflects a positive valuation of a relationship. Thetwo-dimensionality of commitment was also empirically confirmed in channelrelationships (Kumar et al., 1994; Geyskens et al., 1996). Thus, we propose:

H1. Both “affective” commitment and “calculative” commitment are positivelyrelated to customers’ intention to continue the relationship.

Antecedents of relationship commitmentCommitment is something that is built gradually during the development of arelationship, and parties can be committed for different reasons. Summarising earlierstudies, several general antecedents to relationship commitment can be identified;relational bonds that are created between the parties during the course of therelationship, the trust that has been established between the partners, and the servicequality.

Relational bonds. Both the (American) marketing channels literature as well as the(European) literature of the Industrial Marketing and Purchasing Group (IMP Group)(cf. Ford, 1990; Moller and Wilson, 1995; Ghauri, 1999) argue that businessrelationships develop and grow by the incremental investments that are made in therelationship by the parties. Channel management literature describes this as thegrowing interdependency between the partners, whereas the IMP Group describes thisas the creation of relational bonds between the parties. These bonds can be structuralor social in nature.

Structural bonds. Structural bonds are the ties created on a corporate level in arelationship that, if terminated, will result in considerable economical or financial costsfor the parties.

The creation of a structural bond happens when the two parties make investments thatcannot be retrieved when the relationship ends, or when it is difficult to end the relationshipdue to the complexity and cost of changing sources (Turnbull and Wilson, 1989, p. 233).

The more investments are made in a relationship, the more difficult its disengagementbecomes and the more a party will be committed to continue the relationship. Thisconcept is related to the (inter)dependency of the parties in the relationship and issimilar to the power-dependence and transaction cost theories that are used in channelmarketing research. A party’s dependence on the other party is regarded as animportant antecedent to its relationship commitment. Dependence has been defined inthe marketing channel literature in different ways (Heide and John, 1988; Anderson andWeitz, 1992; Ganesan, 1994; Morgan and Hunt, 1994; Kumar et al., 1995; Andaleeb,1996), and is largely determined by the importance of the relationship to a party andthe replaceability of the partner.

In service relationships, little attention has been paid to the structural bondsbetween the parties. Halinen (1996) argues that corporate investments are not as largein service relationships as in other business relationships. Customers have to invest in

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knowledge and information exchange to help the service provider produce the service,but hardly any tangible or heavy capital investments (e.g. machinery) are necessary inthese relationships. Yet, the customer-specific expertise that is built-up over time is avaluable and costly asset that will be lost at a switch (Levinthal and Fichman, 1988).Furthermore, there can be a considerable degree of dependence on the service providercreated by its importance for the party’s business or by the lack of alternatives. Hence,we propose that:

H2a. The strength of the structural bonds between the two parties will influence aparty’s calculative relationship commitment positively.

H2b. The strength of structural bonds between the two parties will influence aparty’s affective relationship commitment.

Social bonds. Social bonds are the ties that are created between the interactingindividuals of the two partner organisations. Although the fundamental basis of abusiness relation is economic exchange, personal exchange is its by-product. The socialbonds are the interpersonal relationships between the buyer and the seller (Turnbulland Wilson, 1989; Bendapudi and Leone, 2002), which are the glue that holds theindividuals together. Personal contact enhances the inter-organisationalcommunication and information exchange, which will enhance the development ofthe relationship as a whole. Wilson (1995) found that buyers who have a strongpersonal relationship with the sellers are more committed to maintaining therelationship than less socially bonded partners.

In service relationships, there is ample opportunity to establish social bonds, and insome cases, the professional is the organization in the eyes of the customer. Seabrightet al. (1992) found that the length of the personal relationship with an auditor is moreindicative of a client’s propensity to switch than the relationship with the organizationas a whole. Also, Moorman et al. (1993), Halinen (1996) and Harris et al. (2003)found that the social ties are positively related to the strength of businessservice relationships. Bendapudi and Leone (2002) provide an example of a customer’srelationship with a particular employee, which can be stronger than the customer’srelation with the vendor firm. We suggest that:

H3. The strength of the social bonds between the parties will influence a party’srelationship commitment positively.

Trust. In the marketing channel literature, special attention is paid to the role of trustin the relationship. Because bonds and investments in a relationship expose parties todependence and make them vulnerable to the actions of the other party, trust is neededfor a relationship to develop. Only if the partner is considered trustworthy will a partybe willing to invest in and become committed to the relationship. The interaction andnetwork theorists classify trust as a social bond between the parties (Turnbull andWilson, 1989). However, although trust is essentially a social construct, it has cleareconomic implications. Trust has been defined as a firm’s belief that another party willperform actions that will lead to positive outcomes for the firm, as well as not takeunexpected actions that can lead to negative outcomes (Anderson and Narus, 1990).It can be recognized as a willingness to rely on a partner in whom one has confidence(Moorman et al., 1993). This definition refers to a behavioral dimension. Trust isregarded as a valuable asset in a relationship. It reduces perceived uncertainties and

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risk and is considered a key variable for relationship success (Morgan and Hunt, 1994;Kemp and Ghauri, 1998; Boersma et al., 2003). Moreover, trust is found to be animportant antecedent to relationship commitment in business relationships (Andersonand Weitz, 1992; Dwyer et al., 1987; Moorman et al., 1992; Ganesan, 1994; Geyskenset al., 1996; Morgan and Hunt, 1994).

Sirdeshmukh et al. (2002) conceptualize trust and provide an analysis ofbehaviors and practices of service providers that build or deplete trust. They alsostudy the mechanisms that convert customer trust into loyalty in relationalexchanges. For services in particular, authors argue that trust is a crucial element inthe exchange because of the high perceived risk attached to the intangibility,complexity and long-time horizon of services (Crosby et al., 1990; Berry, 1995). Thus,trust is found to be an important antecedent to a party’s relationship commitment(Moorman et al., 1993; Halinen, 1996; LaBahn and Kohli, 1997; Ghauri and Fang,2001).

H4. The degree of trust instilled by the partner will influence a party’srelationship commitment positively.

Service quality. Business marketing literature argues that satisfaction is an importantbut not a necessary condition for a party to be committed to the relationship. Theinvestments made in the relationship can be so high or the quality of the availablealternatives so bad that a party is willing to continue the relationship despitedeteriorating satisfaction. Ganesan (1994) found that satisfaction is directly andsignificantly related to a party’s relationship commitment, whereas Morgan and Hunt(1994) found that it did not contribute significantly to a party’s commitment incomparison with structural ties, trust, and shared values. Bolton and Lemon (1999)conclude that customers’ usage level of a particular service can be managed throughcustomer satisfaction management. Thus, although satisfaction is positively related toa party’s relationship commitment, its relative contribution, compared to the otherantecedents, might be very small or non-significant.

Halinen (1996) and LaBahn and Kohli (1997) investigated the impact of serviceoutcome satisfaction on commitment. However, they did not include the otherantecedents in their study. Both found it to be positively related to customers’relationship commitment. Hence, we can propose that service quality as such will bepositively related to customers’ relationship commitment:

H5. The perceived service quality will influence a client’s relationshipcommitment positively.

Our main question is whether service quality contributes significantly to customers’commitment relative to the influence of the relational bonds and trust between theparties. This relative contribution of service quality is explored empirically in ourresearch. The five hypotheses are summarised in the research model (see Figure 1),which is tested in the empirical research.

Research designAs a research setting we chose the advertising sector. It is a business service marketwhere long-term relationships exist, it has been deregulated for a long period of time (inEurope), and it excludes any disturbing influences from regulations on the

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agency-client relationship. We used triangulation to study the concepts and theirinterrelations. A two step approach was followed for empirical research.

First, we conducted a qualitative exploratory study consisting of a literaturereview, key-informant interviews, and interviews with agencies, depicting typicalagency-client relationships to understand the dynamics of agency-clientrelationships and the factors that play a role in their development andmaintenance. The relevance and sufficiency of the proposed variables wereassessed, and indications were sought for their measurement. The interviews weresemi-structured, conducted face-to-face at the respondent’s premises, and lastedbetween 1 and 2 hours.

Both the literature review and the interviews confirmed the existence of affectivecommitment (Halinen, 1996; LaBahn and Kohli, 1997) and supported our hypotheses.The hypotheses that deal with antecedents of commitment were also confirmed and nonew variables were added. The social bonds between the interacting individuals werefound to be important. Regarding the structural bonds, different factors were identifiedthat can form a structural bond in service relationships. Trust was confirmed to be animportant aspect in the relationship, in accordance with previous empirical studies inthe advertising market (Halinen, 1996; LaBahn and Kohli, 1997). Service quality hasnot been studied previously, but it is established that dissatisfaction with the workproduced is the most important reason to terminate an agency-client relationship(Wackman et al., 1987). Most of the respondents interviewed in our research stated thatthe quality of the agency’s work was the most important reason to maintain therelationship.

In the second empirical step we conducted a large-scale field study to test the model.The questionnaire was sent to clients of advertising agencies. Although relationshipsare reciprocal processes, we restricted the study to the client’s side because we were notinterested in the dynamics of agency-client relationships as such (Halinen, 1996) but inthe importance of service quality within this process. Service quality is a

Figure 1.Research model

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customer-based concept defined as customers’ quality perception (Parasuraman et al.,1985) and can only be measured from the client’s side. Furthermore, it is mainly thecustomer’s opinion and attitude that determine whether a relationship is maintained inthe long term.

Our question focuses on the maintenance of existing relationships. Therefore, weapproached clients who had a relationship with their agency for at least one year.These clients (i.e. advertisers) and their representatives were selected through twochannels: First, we approached the two Dutch trade associations of advertisingagencies and asked for support of our research among their members. Then weapproached the member agencies of the trade association to ask for their co-operationin our research, and 33 agencies agreed to participate. These agencies identified 438clients with whom they had at least a year-long relationship and who used at leaststrategic and/or creative concept services (i.e. core service of agency). Furthermore,they identified 6,111 representatives of these clients who had personal experiences withthe agency and decision power over agency decisions. A questionnaire with a pre-paidreturn-envelope was sent to this group.

Secondly, we approached the Dutch Association of Advertisers (BVA), whichrepresents the 284 largest advertisers, and asked the Association to distribute ourquestionnaire among its members. BVA agreed to co-operate and sent thequestionnaires with a supporting cover letter to its members. The respondents wereasked to return the questionnaire in the prepaid return envelope directly to us at theuniversity address. Since no information was available on the nature of agencyrelationships of the BVA members before the mailing, we asked them to indicatewhether their relationships satisfied the same criteria as the agencies from the firstgroup (i.e. one year relationship, core services, personal dealings and decision power).In total 1,112 questionnaires were sent to representatives of 705 Dutch advertisers.After two weeks a reminder letter was sent to all of them.

Sample and representativenessFinally, 241 completed questionnaires were returned, amounting to a response rate of22 per cent of respondents and 31 per cent of companies approached. This is areasonable response rate considering that 20 per cent is a normal response rate incomparable studies among advertisers in the US and Germany (Verbeke, 1988;Clemens, 1994; LaBahn and Kohli, 1997).

Several tests of sample representativeness were conducted. Chi-square differencetests and t-tests on the five items show that there are no significant differences (at 1 percent level) on any item between the total client-group selected by the agencies and theclients that responded from this group. As such pre-research information was notavailable for the BVA members, we compared their answers on these items to theanswers of the agency clients.

The BVA-members scored significantly higher on two items, i.e the communicationbudget and client importance. This difference was to be expected, since the BVArepresents the largest advertisers with higher budgets. Finally, we compared early(within two weeks) and late (after reminder) respondents on the same five items,regardless of their source. The two groups did not differ significantly on any of theitems (at 1 per cent level), thus decreasing the likelihood of non-respondent bias.

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Respondent descriptionThe sample consists of FMCG producers (40 per cent), service providers (29 percent), and business-to-business (16 per cent) companies. Retailers and non-profitswere represented only marginally. This distribution across industries iscomparable to the number of companies per industry in The Netherlands in1995 according to the Central Bureau of Statistics. Large, medium, and small-sizedcompanies are almost equally represented in the sample. Large companies,however, predominate in the sample (37 per cent). The respondents are mainlycommunication directors (45 per cent), marketing directors (19 per cent), andmanaging directors (14 per cent), with decision power ranging from “importantinfluencer” to “final decision-maker”. The relationship length ranges from 1 to 75years, with an average of 6.2 years and a median of 4 years. This is comparableto what Verbeke (1988) found in the Dutch advertising market and what Michell(1988) found in the British advertising market.

MeasuresAll measures were analyzed for validity and reliability using the confirmatory analysisproposed by Steenkamp and Van Trijp (1991) for validating social constructs. We usedseveral measures for uni-dimensionality and scale reliability, such as item-totalcorrelations, exploratory factor analysis (principal axis factoring), and confirmatoryfactor analysis using LISREL-8. The items and the scale properties after the scaleanalysis are summarized in Table I.

Relationship commitment. The two dimensions of relationship commitment, i.e.affective and calculative commitment, were operationalised using the scales developedby Kumar et al. (1994) and Geyskens et al. (1996). The final measures for bothdimensions were valid and reliable (see Table I).

Relationship intentions. The scales used by Kumar et al. (1994) were adapted tomeasure clients’ intentions to stay and to search for alternatives. The validation ofthese measures showed that both intentions reflect two sides of one underlyingconstruct – the ‘intention to stay’. The items were merged into one scale which wasfound to be reliable and valid (see Table I).

Structural bonds. Since structural bonds are different for business servicerelationships, we used the scales proposed by Wilson and Mummalaneni (1990), Heideand John (1988) and Halinen (1994), and adjusted them based on our interviews in theadvertising industry. Several bonds were suggested to be relevant in theserelationships:

. investments in knowledge and classified information were termed “investmentbonds”; and

. considerable costs of switching due to the lack of transparency of the servicemarket and the long start-up costs with a new agency perceived by the clientwere termed “switch bonds”.

Finally, we found from our interviews that some clients were “tied” to their agency bycompany internal rules and regulations (e.g. contracts, directions from theheadquarters, or shares in the agency). To reflect the external nature of these bondswe termed them “stuck bonds”. We found reliable and valid scales for each type ofstructural bond (see Table I).

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Table I.Descriptive and

correlation matrix

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Social bonds. We used the scales proposed by Halinen (1994) and Wilson (1990) tomeasure the social ties between the parties. The scale measured the social networkbetween the parties and the degree of personal affection. After purification, two itemsremained that measured the frequency and intensity of interactions.

Trust. Trust was measured using the scales developed by LaBahn and Kohli (1997)and Moorman et al. (1993) that were used and validated in business services markets.These measures were also found to be reliable and valid in our research (see Table II).

Service quality. Service quality was measured by three items that asked forcustomers’ overall quality rating of the agency services, absolute as well as relative totheir competitors. The service quality was measured by perception scores, becauseempirical studies consistently show that perception scores alone are a better predictorof customers’ service quality assessment (Parasuraman et al., 1994). The scale wasvalid and reliable (see Table I).

Analysis and resultsTable I shows the means, standard deviations, and intercorrelations between theresearch variables. The standard deviations are relatively high (from 0.8 to 1.2 onfive-point scales and from 1.2 to 1.5 on seven-point scales), indicating that there isvariation in the answers that can be explained (for the endogenous variables). Thecorrelations in Table I give a first test of our hypotheses. As proposed, both affectiveand calculative commitment are significantly and positively correlated with theintentions to stay (0.73 and 0.20, respectively). The structural and social bonds, trustand service quality are also significantly related to affective commitment (rangingfrom 0.21 to 0.78), with stuck bonds displaying a negative correlation. All proposedantecedents are significantly and positively related to calculative commitment, with anexception of stuck bonds and trust. Before providing an interpretation of thesefindings, we will test the hypotheses in more depth, using structural equationmodeling. This method allows us to test all hypotheses simultaneously, accounting formeasurement errors in the research constructs.

The research model was tested using LISREL-8. We produced composite scalescores for each research construct using the composite reliability, which takes the

Figure 2.Proposed structuralresearch model

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measurement error into account (the scale mean is used and the error variance is fixedto ð1 2 reliabilityÞ � scalevariance; Baumgartner and Homburg, 1996). Thesecomposite measures were used in the structural model in which the causalrelationships are defined as proposed in the research model (see Figure 2).The covariance matrix was used as input and the exogenous constructs were allowedto correlate freely.

The fit of the proposed structural model to the data is moderate (x2 ¼ 45:5, df ¼ 22,p ¼ 0:002, RMSEA ¼ 0:069, GFI ¼ 0:96, AGFI ¼ 0:89, CFI ¼ 1:0). Chi-square issignificant, indicating that this model is significantly different from the observedinterrelationships between the variables. The other fit indices show a moderate fit ofthe model to the data (both the GFI and AGFI are on or above their recommended 0.90level). To assess the extent of this model fit, we compared the fit-statistics of this modelto the fit-statistics of the saturated model (Gerbing and Anderson, 1988). This is themodel in which all concepts are allowed to correlate freely without any constraints ontheir causality. The fit of this model is the maximum fit that is possible for anystructural model using the constructs as defined. Thus, it can serve as a comparisonstandard. A chi-square difference test between the fit-statistics of both models shows asignificantly higher chi-square value, with six extra degrees of freedom. This meansthat the structural model does not explain the covariances between the items as istheoretically possible (Anderson and Gerbing, 1988).

Adjusting the research modelAnalysis of the residuals shows that the interrelations of the stay intentions with bothservice quality and the stuck bonds are insufficiently explained by the proposed model.This analysis indicates that a direct path from service quality to clients’ stay intentionsand from the stuck bonds to the stay intentions should be added to the model. Beforethese paths are added for statistical reasons, their theoretical meaning has to beassessed.

Stuck bonds! stay intentions. A direct effect of the stuck bonds on the stayintentions means that the contracts and regulations that tie a customer to its agencywill influence their stay intentions directly, regardless of their degree of commitment.Contracts force/motivate a client to stay regardless of the desire or perceived need to doso. Therefore, we add this path to the model.

Service quality perception ! stay intentions. Adding a direct path from servicequality to stay intention means that service quality can influence clients’ stayintentions directly, regardless of customers’ relationship commitment. This directeffect of service quality on behavioral intentions has been found in many servicequality studies (see, for example, Zeithaml et al., 1996) and is thus theoretically wellgrounded. Since the influence of service quality on long-term relationship maintenanceis the core issue in this study, the addition of this path to the model gives us moreinsight into the role that service quality plays in service relationships. Therefore, weextend the model with this path as well.

This alternative model was estimated using LISREL-8. The addition of each path tothe initial proposed model resulted in a significant decrease in the chi-square value ofthe model (at 1 per cent level). The alternative model with two added paths shows agood fit to the data (see Table II). To assess the comparative fit, we compared the fit ofthis model to the initial model and to the saturated model. Table II shows that the

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alternative model fits the data significantly better than the proposed model, and that itfits equally well as the saturated model, which means that the interrelationshipsbetween the constructs are maximally explained by the model. To increase the validityof the model, we constrained each insignificant path to zero. None of these constraintshad a significant effect on the chi-square value of the model (at 5 per cent level),indicating that these relationships should be regarded as zero (or non-) relationships.This adjusted model is presented in Figure 3 and the results are described in Table III.

Table III shows that a large amount of variance in affective commitment andstay-intentions is explained by the antecedents in the model, the squared multiplecorrelations are 68 and 64 per cent respectively. Affective commitment is significantlyinfluenced by the client’s perceived service quality and trust in the agency. The “stuckbonds” also influence affective commitment significantly, but negatively. Stayintentions are influenced by customers’ affective commitment and directly by theperceived service quality and the “stuck bonds”. Calculative commitment does not

Absolute fit statistics x 2 difference tests

Models x 2 df p value Models Dx 2 Ddf p value

Saturated model (Ms) 23.8 16 0.094Proposed model (Mt) 45.5 22 0.002 Mt-Ms 21.7 6 0.001Unconstrained model(Mu; two suggested paths added) 25.7 20 0.17 Mu-Mt 19.6 2 ,0.00

Mu-Ms 1.93 4 0.75Constrained model(Mc; NS relations from Mu set to 0) 30.6 31 0.49 Mc-Mu 4.84 11 0.94

Mc-Ms 6.77 15 0.96

Table II.Fit statistics anddifference tests of nestedalternative models

Figure 3.Final structural modelwith estimated parameters

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influence the stay intentions significantly, and is to some extent (10 per cent) explainedby the switch bonds.

Relationship commitment in service relationships. H1, which deals with the influenceof affective and calculative commitment on relationship intentions, is partly confirmed.The analysis of the measurement model showed that commitment is indeedmultidimensional, and we found reliable and valid measures for both an affective and acalculative commitment dimension in these service relationships. Affectivecommitment has a strong positive influence on customers’ stay intentions.Customers’ calculative commitment is significantly correlated (see Table I), buttogether with affective commitment does not contribute significantly to customers’stay intentions. This indicates that this commitment dimension is not a strongmotivation for clients to stay in the relationship.

Antecedents to relationship commitment. Two of the three measured structuralbonds influence clients’ affective as well as calculative relationship commitment. Inaddition, we found that the stuck bonds have a positive direct influence on customers’stay-intentions. This means that although they diminish clients’ desire to stay, theyincrease the likelihood that they will stay exactly because they are stuck to therelationship. The “stuck bonds” are not significantly related to calculativecommitment, indicating that rules and contracts do not contribute to the perceivedneed to continue the relationship. The switch bonds are positively related to customers’calculative commitment, as expected. The more difficulties a client experiences inswitching to another agency, the more s/he feels the need to continue working with thepresent agency.

The third hypothesis, regarding the effect of the social bonds, is rejected. The socialbonds do not influence clients’ relationship commitment significantly. Perhaps adifferent measure of this concept could have provided a better insight into the effect ofthis variable on relationship commitment. This finding is not consistent with earlierstudies (e.g. Harris, 2002; Halinen, 1996). We believe that it is partly due to the nature ofadvertising sector, where the service itself and its impact/satisfaction is moreimportant than personal relationship. However, this needs closer attention in futureresearch.

Standardiseda coefficients (t-values)Antecedents Affective commitment Calculative commitment Stay intentions

Service quality 0.55 (5.75) 0 0.32 (3.01)Trust 0.32 (3.15) 0Stuck bonds 20.13 (22.06) 0 0.21 (3.01)Switch bonds 0 0.32 (3.91)Social bonds 0 0Investment bonds 0 0Affective commitment 0.53 (4.69)Calculative commitment 0Multiple R 2 0.68 0.10 0.64

Notes: aParameters shown as 0 are proposed relationships that were found to be insignificant: theirconstraint to 0 did not influence the fit of the model, and therefore they shown as 0; fit statistics finalmodel: x 2 ¼ 30:6, df ¼ 31, p ¼ 0:49, RMSEA ¼ 0:0, GFI ¼ 0:98, AGFI ¼ 0:95, CFI ¼ 1:0

Table III.Results final model

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The fourth hypothesis, regarding the effect of trust, is confirmed by the analysis.Trust is positively and strongly related to clients’ affective commitment. Even thoughtrust can be regarded as an important relationship asset that would influencecustomers’ perceived need to continue the relationship, the analysis shows that trust isnot significantly related to customers’ calculative commitment.

The fifth hypothesis, which deals with the effect of customers’ perceived servicequality, is also confirmed. Service quality is positively and very strongly related tocustomers’ affective commitment. Furthermore, service quality also directlycontributes to clients’ relationship intentions, regardless of their desire or perceivedneed to stay in the relationship. This means that apart from its effect on customers’relationship commitment, the delivered service quality can be a motivation in itself tocontinue a relationship.

Importance of service quality. The main question concerning the relativecontribution of service quality to relationship commitment can now be answered.The results in Table III show that service quality makes the highest contribution tocustomers’ affective commitment (0.55) compared to the trust (0.32), the stuck bonds(20.13), and the other proposed antecedents. In addition to this strong effect oncommitment, it has a direct influence on customers’ intentions directly. This findingconfirms that quality is not only related to a potential start of a relationship (i.e.intentions) but also to its long-term maintenance (i.e. commitment).

DiscussionIn this article we developed a model of how service quality contributes to the long-termmaintenance of service relationships. The main goal was to assess the contribution ofservice quality to the maintenance of an existing service relationship relative to other(relationship) factors that influence a party’s commitment during a relationship.

Our findings indicate that service quality contributes very strongly to themaintenance of long-term customer relationships. Its impact on customers’commitment was found to be stronger than the impact of trust, which is regardedas a key mediating variable in other business relationships (Morgan and Hunt, 1994).Furthermore, we found that service quality is not only strongly related to customers’affective commitment, but also directly related to their behavioral intentions. This is animportant contribution to existing research on service quality. The findings confirmthe positive effect that has been frequently found between service quality andcustomers’ stay intentions (Zeithaml et al., 1996).

Our findings suggest that even if customers do not feel affective commitment theywould still be inclined to stay if their agency produces good quality work. It is,however, questionable whether the perceived quality as such is a sufficient motivationto maintain a relationship in the long term. If customers are not also affectivelycommitted, the relationship will dissolve more easily once problems occur. Realcustomer loyalty originates from the part of service quality that contributesto customers’ affective commitment. This overriding importance of service quality incustomers’ commitment is consistent with what LaBahn and Kohli (1997) found forservice relationships.

The absence of calculative motives in maintaining a relationship is underscored bythe finding that neither the investment in the relationship nor the social bonds play asignificant role in clients’ commitment. However, we found that clients do invest in

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time, effort, and knowledge and that they do perceive switching costs (means are 3.5and 3.6, respectively, on a five-point rating scale). Furthermore, switching costscontribute to the calculative commitment, but – again – this is not reason enough tokeep the relationship. The investments are interpreted differently in servicerelationships than relationships where the investments are more tangible, forexample in channel relationships (Kumar et al., 1994; Geyskens and et al., 1996). Thiscan be explained by the fact that in services the investments are less tangible than inmany other business relationships (Ganesan, 1994; Wilson, 1995). Nevertheless, theabsolute contributions of both structural and social bonds to customers’ affectivecommitment were significant with correlations ranging from 0.19 to 0.35. Our studythus confirms the ideas expressed by Halinen (1996) and Seabright et al. (1992), whoargued that in service relationships the structural bonds are of a different nature andless strong than in other business relationships because of the intangibility of theinvestments. On the other hand, these authors and others (Harris et al., 2003) alsoargued that the social bonds will be more important in service relationships, which isonly confirmed in our study by the correlation between social bonds and commitment(r ¼ 0:30, p , 0:05) but not by the relative contribution.

In theoretical terms, the correlation analysis shows that investments play a role inservice relationships even if they are of a different nature. The powerful technique ofstructural equation modeling shows that their effect is not significant when otherantecedents are taken into account. The influence of service quality and trustovershadows the effect of other antecedents, which has implications for the meaning ofthese variables.

Managerial implicationsThe study reveals that service quality is the most important factor in establishinglong-term customer relationships and thus customer retention. The client-specificexpertise developed by the service provider is a valuable asset and personal tiesbetween individuals involved are crucial in establishing long-term businessrelationship. However, service quality is relatively more important than trust andsocial bonds. Once such a relationship is developed, switching costs are considered tobe high, and that increases the desire of the parties to stay in the same relationship.The study also reveals that efforts to keep clients by formal agreement has no positiveinfluence on establishing a long-term relationship. For managers, it means thatcreating relationship commitment through service quality is more important thanbinding customers in long-term contracts.

In service relationships it seems that the only underlying motivation or attitude thatwill keep a relationship in the long term is customers’ affective desire to stay. This is animportant finding, for it means that the perceived need to stay is not very strong andservice customers cannot be “locked in” to a relationship. Interestingly, we found nosignificant correlation between the length of the relationship and customers’ affectiveor calculative commitment, indicating that there is nothing intrinsically built duringthe relation that makes clients more prone to stay or committed to the relationship.Regardless of the length of the relationship, service providers should continuouslymake sure that customer’s are affectively committed. Our study shows that servicequality and trustworthiness have the strongest effect on their commitment dimension.

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Concluding remarksThe findings of this research suggest several avenues for further research. First of all,this study was conducted in one service industry and replication is needed in othersectors. Some of the findings might be particular to advertising services. Even thoughclients need consistency in their advertising and would benefit from long-termrelationships, they also need creativity and originality, which, according to customers,diminishes when the agency becomes too familiar with a client. Furthermore, clientshave to invest in very few tangible assets in these relationships. It would be interestingto study service relationships where customers have to make more tangibleinvestments in the relationship than in agency-client relationships, such asauditor-client relationship where clients use provider-specific software to make theauditing task more efficient. These investments will be lost if they switch to otherauditors, and might become a motivation to keep the relationship.

The weak contribution of social bonds should be studied further, since they mightbe of particular relevance for particular service relationships. The final measure weused in the analysis consisted of the frequency and intensity of interactions, which is arather limited conceptualisation of this construct. Due to operationalisation reasons, weexcluded the variables that measured the interpersonal liking and friendship, or the“click”, between the interacting individuals, which was found to be an important aspectin agency-client relationships in other studies. A different measure of this conceptmight provide more insight into the effect of this variable. Furthermore, research canbe done on the effect of different aspects of the service quality concept as servicequality is regarded and found to be a multidimensional and complex concept(Parasuraman et al., 1985; Bolton and Drew, 1991). An interesting avenue for furtherresearch is to investigate which dimensions of customers’ quality perception contributeto their relationship commitment.

Finally, this study raises another question regarding service relationships ingeneral. The current fashion to “lock” customers in by increasing the switch barriersmight not be a very successful strategy if long-term profitability and deep selling arethe goal of these relationships. Tying customers for reasons other than the excellenceof your services might actually diminish the chance that customers develop anaffective commitment to the company even if they are satisfied with the service.

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Erratum

EJM, Vol. 38 No. 9/10Owing to errors in the production of the article “Export performance as an antecedent ofexport commitment and marketing strategy adaptation: evidence from small andmedium-sized exporters’’ by Luis Filipe Lages and David B. Montgomery, pp. 1186–1214,in the above issue, some of the items in Table II are misaligned.The correct table is shown in the article on the Emerald Fulltext web site.The Production Department sincerely apologises to the authors and readers for this error.

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