Investment in Consumer relationship: A replication study

AbstractThis study is a critical reassessment and extension of De Wulf et al.s (2001) framework investigating retail investments in consumer relationships. Their initial model relates four types of relationship marketing efforts to perceived relationship investment, in turn inuencing relationship quality and ultimately behavioural loyalty. Based upon signaling theory, we extend this model by introducing product and service efforts as additional antecedents. Based upon 200 consumers reporting on their relationship with apparel retailers, the SEM results provide guidelines for retailers how to increase the quality of their relationships with consumers by strengthening consumers perceptions of relationship investment.Introduction:

This study is extension of the De Wulf et al. (2001) framework. De Wulf et al. (2001) recently developed and tested a model which differentiates four tactics of relationship marketing for the purpose of strengthening the relationship between consumer and retailer. Four tactics are Interpersonal communication, direct mail, tangible rewards and preferential treatment.The study concludes the results which show positive relationship between four tactics and perceived relationship investment. The study also concludes that perceived relationship investment ultimately then enhance the relationship quality as well behavioral loyalty.No doubt this initial study identifies the relationship between two parties one is retailer and other is consumer this was a first empirical assess which also identifies two shortcoming which give direction for future research to overcome shortcoming of While their study was an interesting first attempt to empirically assess the effect of De Wulf et al. (2001) study.First, De Wulf et al.s (2001) study hurtled with the partially captured meaning of behavioral loyalty because its measure was self-reports. For the confidence of behavioral loyalty can be achieved with access to behavioral data on the history of customer purchase which are not subject to the potential recall loss. Which enable the investigation of longer string of purchase.

Second, three additional antecedents tangible elements ( product quality, product price, and service quality ) need to be added in relationship investment for the sake of better capture the mechanism behind mechanisms behind the establishment of strong retailerconsumer relationshipsSERVQUAL measures (Parasuraman et al. 1988; 1991) applied in context of study which was not initially applied to any relative context of the study which examine relationship investment.

The core objective of the study is to add additional antecedent like; product quality, product price, service quality and then to see the impact of these on the consumer retailer relationship. This also extend the initial model of De Wulf et al.s (2001) study. This study also want to investigate that either retail experience is necessary for the marinating loyal relationship earns retail investment

Literature review:

No any past research has conduct the research For the purpose of building the customer relationship. Many author recognize the significance of relationship marketing efforts (Dwyer etal. 1987; Ganesan 1994; Gwinner et al. 1998), service effort (Boulding et al. 1993; Parasuraman et al. 1994) and product effort (Anderson and Sullivan 1990; Metcalf et al. 1992) simultaneously, yes research has be conducted but separately not collectively. So this study integrate all three efforts (product, service and customer relationship) in one single model. So this integrated model will give more reliable and valid results.

Most of the research uses single method data source which cause biasness but this study is using multiple methods relate to attitudinal data (from customer survey) to behavioral data (results from a customer data base).

In initial study external validity was done by consumer having different variety of retailers. But this study focus on internal validity.First of all we discussed the additional antecedents of perceived relationship investment in theoretical framework of signaling theory which gives now new modified and extended conceptual model in result. After it we elaborate the results in research design of this study then at last we will discuss the results and implication of this study.

Theoretical backgroundThe previous studies provide reciprocity point of view for justification of tested conceptual model. Reciprocal action theory shape that actions are taken by one party in an exchange relationship are reciprocated by the another party, resulting from anticipating feelings of another party (Li, et al., 1997)). (Wulf, et al., 2001) he had applied this reasoning to relationships between retailers and consumers. The model suggest that an investment of time, effort and other resources in a retailerconsumer relationship creates psychological ties, which motivates them to maintain the relationship and makes an expectation of reciprocation. We will also relate this principle in a consumer context, on the behalf of a retailers irrecoverable resources by the construct of perceived relationship investment. Then following constructs of relationship quality and behavioral loyalty, representing consumers reciprocation of a retailers investments, and reflect the extent to which consumers want to continue their relationship.

Another contradicts theory to the reciprocity principle, signaling theory, which is emerging from the study of economics, which can make a significant addition to examine the development and sustainability of long-term relationships. In order to stimulate reciprocation, indicators need to be sent out that inform the other party about its unobservable intentions (Boulding and Kirmani 1993). Considering basic assumptions of signaling theory, different parties passes different amounts of information, affecting the nature of mutual relationship of retailer and consumer. Initial for consumer, there is no reliable data for particular product. This problem of information has been reduced by both parties when the share information (Boulding and Kirmani 1993; Kirmani and Rao 2000).when a manufacturer offer warranties to their customer for product, by providing the customer with an suggestion of the product reliability level can be estimated.

Relationship of marketing efforts distinguished by (Wulf, et al., 2001)that easily be understand as signals to inform customers about the retailers unobservable relationship investment, i.e. offering discount on coming again on same restaurant, it can be considered as a signal that the restaurant owner wants to build long term relationships with the customers.Conceptual model and research hypotheses:

Perceived relationship investment:

De Wulf et al. (2001) Perceived relationship investment can be defined as a perception of a consumer for the retailers efforts like using resources, time and attention for building and maintaining relationship with regular customers. And this relationship hasnt any outside value as well these unable to recover if once relationship terminated. The main construct of De Wulf et al. (2001) study is perceived relationship.

In figure: 1 perceived relationship further discussed with antecedes and consequences. Three different signals need to be discussed in this figure; service effort (responsiveness, reliability, empathy, assurance and tangibles), product effort (product price and product quality) and relationship marketing efforts (interpersonal Communication, direct mail, preferential treatment and tangible rewards) also discussed behavioral loyalty and relationship quality the reciprocal Consequences of perceived relationship investment.

Product efforts In product efforts examine by Corstjens and Lal (2000) show that consumer of goods can be differentiated by the heterogeneity in their trade-offs between quality and price. According to them, a quality segment, deriving greater the utility from perceived quality, and a price segment is driven by low prices, can invariably be distinguished. Therefore, we examined both types of product efforts separately in our research.

Product price

simultaneous with Dabholkar et al. (1996), we analysis product price as an significant determinant of store loyalty, being distinctive from service quality. We describe product price as a consumers perception of the extent to which the products selection offered by a retailer is expensive (Dodds et al. 1991). In other words, price refers to what is given up or gives up in exchange for a product (Ahtola 1984; Monroe and Krishnan 1985). We judge product price as a signal of perceived relationship investment. Ceteris paribus asking a low price may imply that the retailer is apparently willing to forgo short-term profits in return for consumer loyalty. Consequently, we propose the following hypothesis:

H1: A lower perceived level of product price leads to a higher perceived level of relationship investment

Product quality We define product quality such as a consumers level of satisfaction with the products selection offered by a retailer (Gaski and Etzel 1986; McDaniel and Burnett 1990). A high level of products quality are generally considered to make consumers feel eager, pleased, excited, satisfied, content, committed and loyal. Finding high-qualityof product that suit a consumer needs often engender feelings of satisfaction and pride (Yoo et al. 1998). However, for a store to carry high quality products, it may be required to make costly arrangements with suppliers, higher product inspection costs, and to create other tangible investments (Garvin 1984). Such signs involve up-front expenditures that are expected to be recovered in the future by the benefits of strengthened the relationships with consumers. through consequence, such expenditures may stimulate consumers confidence that the retailer is willing to make investments in mutual relationship.

H2: A higher perceived level of product quality leads to a higher perceived level of relationship investment.Service efforts:(Parasuraman, et al., 1998) Defined service quality as the extent to which consumers perceives service offered by a retailer is superior or excellent. We assess service quality by adapting (Parasuraman, et al., 1998)SERVQUAL scale, consisting of 22-items assessing five different dimensions of service quality (i.e. reliability, responsiveness, assurance, empathy and tangibles.) Tangibles mean the physical facilities, equipment, and appearance of personnel in the retail store. Reliability is the ability of the retail store to perform the promised services dependably and accurately. Responsiveness is described as the willingness to help customers and provide prompt service as needed. We define Assurance as the knowledge and courtesy of employees and their ability to inspire trust and condence. Lastly, empathy is defined as the caring and individualized attention the rm provides its customers with.Many studies have operationalized SERVQUAL scale differently such as (Cronin, et al., 1992) adopted performance based measure of service quality but (Kassim, et al., 2002) recently relied on original five dimension construct of service quality, the one that we are also using in our study. Despite the strong support for performance based measure of service quality (Jr, et al., 1982) we only rely on consumer perception in order to measure service quality in retail outlets, because of time constraint to measure service quality. Offering service quality requires investment from retail store. Service quality is that amount of money that is invested in order to earn customer loyalty. In other words such investments seem to enhance customer loyalty. We hypothesize as:

H3 : A higher perceived level of service quality leads to a higher perceived level ofRelationship investment.

Relationship Marketing tools:Direct Mail: (Wulf, et al., 2001) considered direct mail as consumers perception of the extent to which a retailer keeps it regular customers informed through direct mails, the one that we use in this study. Crosby and Stephens 1987 consider direct mail necessary to keep relationship with customer. We hypothesize as:

H4: A higher perceived level of direct mail leads to a higher perceived level ofrelationship investment.

Preferential treatment: Preferential treatment refers to a consumers perception ofthe extent to which a retailer treats and serves its regular customers better than itsnon-regular customers. Preferential treatment leads customers to feel important (Peterson 1995.) Thats why we hypothesize as follows:

H5: A higher perceived level of preferential treatment leads to a higher perceivedlevel of relationship investment.

Interpersonal communication: interpersonal communication refers to consumers perception of the extent to which a retailer interacts with its regular customers in a warm and personal way than as non regular customers. The social interaction between customer and retailer determine relationship outcomes (Lawrence A. Crosby, et al., 1990), (Kevin R Gwinner, 1998) According we hypothesize as:

H6: A higher perceived level of interpersonal communication leads to a higherperceived level of relationship investment.

Tangible rewards: We dene tangible rewards as a consumers perception of the extent to which a retailer offers tangible benets such as pricing or gift incentives to its regular customers in return for their loyalty.Tangible rewards are often helpful in earning customer loyalty (Peterson 1995; Sharp and Sharp 1997.) As a result we hypothesize as:

H7: A higher perceived level of tangible rewards leads to a higher perceived levelof relationship investment.

Relationship Quality as a result of perceived relationship investment

(Smith, 1998); (Garbarino, et al., 1990) defined relationship quality as the strength of overall relationship as a result of perceived relationship investment. We consider relationship quality in line with (Wulf, et al., 2001) as construct that encompasses relationship satisfaction, trust and relationship commitment. That means that higher level of relationship satisfaction, trust and relationship quality are the antecedents of higher level of relationship quality.As we intend to replicate the (Wulf, et al., 2001) study, we applied identicaldenitions and measures for each of the subdimensions of relationship quality. Wedene relationship satisfaction as a consumers affective state resulting from anoverall appraisal of his relationship with a retailer, trust as a consumers condentbelief in a retailers honesty towards this consumer, and relationship commitment asa consumers enduring desire to continue a relationship with a retailer accompaniedby this consumers willingness to make efforts at maintaining it. Hence we hypothesize as:

H8: A higher perceived level of relationship investment leads to a higherperceived level of relationship quality.

Behavioural loyalty:Previous literature suggests that there is strong relationship between relationship quality and behavioral loyalty (Bolton, et al., 1991) Accordingly we build on existing literature and describe behavioral loyalty as a composite measure based on consumers purchasing frequency and amount spent at a retailer compared with the amount spent other retailers from which the consumer buys (Wulf, et al., 2001). Accordingly we hypothesize as follows:

H9: A higher level of relationship quality leads to a higher level of behavioral loyaltyMethod:Sample and ProcedureWe used convenience sampling for selection of sample, leading to a sample of 300 students of Sukkur IBA. Web survey and mail survey were used in order to collect information.We sent a mail survey to all customers selected from the database, asking them toprovide their perceptions on their relationship with the retailer, comprising allconstructs examined in our study. After a period of two weeks, 250 respondents (83% response rate) returned the completed questionnaire. After removing those respondents from the sample who did not complete all questions or did not provide name and address information, we retained 200 usable responses (66% response rate) for data analysis.Measures:With respect to the replication part of the model, all measures were identical to theoriginal study of De Wulf et al. (2001). The constructs that we added to the modelwere based upon established measures: product price (Dodds et al. 1991), productquality (Gaski and Etzel 1986) and service quality (Parasuraman et al. 1994). Table 1provides an overview of construct means, standard deviations, and correlations.

Table 1. Mean, Standard Deviation and CorrelationsCorrelations

MeanSDSQRQDMPTICTRPPPQPRBL

SQ4.45581.08724--

RQ4.92651.22243.767**--

DM3.03621.71768.432**.310**--

PT4.51311.41374.667**.676**.333**--

IC4.03651.41405.401**.460**.162*.431**--

TR4.37931.38313.612**.576**.283**.582**.521**--

PP4.68771.25620.581**.561**.218**.639**.427**.373**--

PQ5.02941.60659.600**.661**.159*.554**.273**.435**.614**--

PR4.99821.41189.712**.816**.284**.596**.402**.573**.588**.749**--

BL3.6542.99903.415**.573**.265**.454**.317**.341**.444**.562**.507**--

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

Results:Structural Model Evaluation:Table 3 indicates that all signicant relationships between latent constructs are in the hypothesized direction, providing initial evidence for our conceptual model and supporting the nomological validity of the constructs. No empirical evidence was found for the hypothesized relationship from product price (H1) to perceived relationship investment, suggesting that consumers do not perceive product price to be signal of relationship investment. Contrary to these ndings, service quality and product quality reveals a strong positive impact on perceived relationship investment, providing support for H3 and H2. With respect to the relationship marketing efforts, we only found support for tangible rewards (H7) as signal of perceived relationship investment. No signicant relationship with perceived relationship investment could be found for preferential treatment (H5), Direct Mail (H4) and Interpersonal Communication (H6). The fact that consumers perceived the retailer to make investments in their mutual relationship was convincingly reciprocated in terms of increased relationship quality, supporting H8. Finally, we could nd strong support for the hypothesis that higher levels of relationship quality lead to more loyal behaviour (H9).

Table 3. Structural Model

EstimateS.E.C.R.PLabel

PR