Customer Relationship Management within the Industry of Speciality Stores – How customer loyalty can be explained by

satisfaction, trust and commitment

Authors: Marcus Ahlmén, Marketing Programme Petter Jönsson, Marketing Programme Andreas Thörnblad, Marketing Programme

Tutor: Michaela Sandell

Examiner: Dr. Pejvak Oghazi

Subject: Customer Relationship Management

Level and semester: Bachelor’s Thesis, Spring 2012

Acknowledgements This study was performed as our bachelor thesis during the spring semester

of 2012. The process has provided us with a deeper knowledge about the

subject at hand as well as how to manage extensive workload within a limited

timeframe. During the completion of this study we have received support

from a number of individuals that we would like to acknowledge.

First of all, we would like to thank the anonymous company in this study and

their representatives for a successful and giving collaboration. Secondly, we

would like to thank Dr. Magnus Hultman for his guidance and structural

assistance that we believe have improved this study considerably. Finally, we

want to send a special thanks to our supervisor Michaela Sandell that

unconditionally helped us in a constructive manner both regarding problem

solutions and general concerns.

Linnaeus University, School of Business and Economics, 5/21/2012

Marcus Ahlmén Petter Jönsson Andreas Thörnblad

Abstract The purpose of this thesis is to explain how satisfaction, trust and

commitment impacts customer retention and word-of-mouth communication

within the industry of Speciality Stores. The study takes off from a historical

perspective where the development of marketing is presented, which

ultimately leads to customer relationship management (CRM). The study

raises the components of customer loyalty and the difficulties of how to build

successful customer relationships within the industry of Speciality Stores. A

survey questionnaire is conducted and distributed digitally to respondents that

are customers of an anonymous company within the industry under

investigation. The main findings in this study are that companies within the

industry of Speciality Stores can achieve word-of-mouth communication

through customer satisfaction and trust. The study also finds that the features

of customer satisfaction have a stronger impact on word-of-mouth

communication than the features of trust. This means that it is these features

of the ones treated in this study that companies within the industry of

Speciality Stores should enact in order to best achieve word-of-mouth

communication among its customers.

Table of Contents Chapter 1. Introduction .................................................................................... 7!

1.1 Background ............................................................................................ 7!1.2 The Industry of Speciality Stores ........................................................... 9!1.3 Problem Discussion ............................................................................... 9!1.4 Purpose ................................................................................................. 12!

Chapter 2. Literature Review ......................................................................... 13!2.1 Customer Relationship ......................................................................... 13!2.2 Satisfaction ........................................................................................... 14!

2.2.1 Service Quality .............................................................................. 16!2.2.2 Service Features ............................................................................ 16!2.2.3 Customer Complaint Management ............................................... 17!

2.3 Trust ..................................................................................................... 17!2.3.1 Shared Values ............................................................................... 19!2.3.2 Communication ............................................................................. 20!2.3.3 Opportunistic Behavior ................................................................. 20!

2.4 Commitment ........................................................................................ 21!2.4.1 Relationship Benefits .................................................................... 24!2.4.2 Switching Costs ............................................................................. 25!2.4.3 Scarcity of Alternatives ................................................................. 26!2.4.4 Shared Values ............................................................................... 26!

2.5 Customer Loyalty ................................................................................. 27!2.5.1 Customer Retention ....................................................................... 28!2.5.2 Word-of-Mouth Communication ................................................... 28!

Chapter 3. Conceptual Framework ................................................................ 30!3.1 The Relationships Between Relationship Quality and Relationship Outcome Within the Industry of Specilaity Stores .................................... 30!

3.1.1 Satisfaction and Customer Retention ............................................ 30!3.1.2 Satisfaction and Word-of-Mouth Communication ........................ 30!3.1.3 Trust and Customer Retention ...................................................... 31!3.1.4 Trust and Word-of-Mouth Communication .................................. 31!3.1.5 Commitment and Customer Retention .......................................... 31!3.1.6 Commitment and Word-of-Mouth Communication ...................... 32!

Chapter 4. Methodology ................................................................................ 33!4.1 Research Approach .............................................................................. 33!

4.1.1 Inductive vs. Deductive Research ................................................. 33!4.1.2 Qualitative vs. Quantitative Research .......................................... 34!

4.2 Research Design ................................................................................... 35!

4.3 Data Sources ........................................................................................ 37!4.4 Research Strategy ................................................................................. 38!4.5 Data Collection Method ....................................................................... 39!4.6 Data Collection Instrument .................................................................. 41!

4.6.1 Operationalization and Measurement of Variables ...................... 41!4.6.2 Questionnaire Design ................................................................... 44!4.6.3 Pretesting ...................................................................................... 46!

4.7 Sampling .............................................................................................. 47!4.7.1 Sampling Frame ............................................................................ 47!4.7.2 Sample Selection ........................................................................... 48!

4.8 Data Analysis Method .......................................................................... 49!4.8.1 Descriptive Statistics ..................................................................... 49!4.8.2 Correlation Analysis ..................................................................... 50!4.8.3 Regression Analysis ...................................................................... 51!

4.9 Quality Criteria .................................................................................... 51!4.9.1 Validity .......................................................................................... 51!4.9.2 Content Validity ............................................................................ 52!4.9.3 Construct Validity ......................................................................... 53!4.9.4 Criterion Validity .......................................................................... 54!4.9.5 Reliability ...................................................................................... 55!

Chapter 5. Data Analysis ............................................................................... 57!5.1 Descriptive Statistics ............................................................................ 57!5.2 Reliability ............................................................................................. 58!5.3 Correlation Analysis ............................................................................ 59!5.4 Hypothesis Testing ............................................................................... 59!

Chapter 6. Discussion, Conclusion & Implications ....................................... 61!6.1 Discussion ............................................................................................ 61!6.2 Conclusion ........................................................................................... 64!6.3 Academic Implications ........................................................................ 65!6.4 Managerial Implications ...................................................................... 65!

Chapter 7. Limitations & Future Research .................................................... 67!7.1 Limitations ........................................................................................... 67!7.2 Future Research ................................................................................... 68!

References ...................................................................................................... 70!

List of Tables Table 1. Research Strategies .......................................................................... 38 Table 2. Simplified Operationalization Table ................................................ 44 Table 3. Demographics .................................................................................. 57 Table 4. Mean & Standard Deviation of Variables ........................................ 58 Table 5. Reliability Test ................................................................................. 58 Table 6. Correlation Analysis ........................................................................ 59 Table 7. Regression Analysis ......................................................................... 60

List of Figures Figure 1. Hypotheses Model .......................................................................... 32 Figure 2. Sample Size Statistical Formula ..................................................... 48

Attachments Attachment 1. Operationalization Table ........................................................ 82 Attachment 2. Framework of Survey Questions ............................................ 83 Attachment 3. Survey Design (Swedish Version) ......................................... 84 Attachment 4. Survey Design (English Version) ........................................... 87

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Chapter 1. Introduction

1.1 Background

Marketing as a concept has been around for quite some time and has

constantly evolved due to continuous change in the marketplace. Initially,

marketing started as a short-term approach with the mere intention to increase

sales (Agariya & Singh, 2011). This type of marketing is described by

Grönroos (1994) as well as Mattson (1997) as transactional marketing and

includes the understanding of the Four Ps of marketing. The Four Ps consists

of product, place, price and promotion that together form a strategic basis for

companies to differentiate themselves to stay competitive in the marketplace.

Barnes, Fox & Morris (2004) mean that as competition increased, the

complexity of the market intensified and by this Agariya & Singh (2011)

mean that companies began to understand the value of customer

relationships. This understanding changed the objectives of marketing from

only attracting customers to also keeping and cherishing the current ones to

achieve long-term relationships and loyal customers (Bitner, Booms, &

Mohr, 1994; Cravens & Piercy, 1994; Grönroos, 1991; Gummesson, 1987).

This shift from short-term transactional marketing towards long-term

relationship marketing was thus inevitable for companies to stay competitive

in accordance with the complexity of the new market conditions (Grönroos,

1994).

According to Özgenera & Iraz (2006) as well as Payne & Frow (2005)

customer relationship management (CRM) is described as the activities

performed by a company to initiate, establish, maintain and develop long-

term relationships with customers. CRM as a concept consider the needs and

desires of each individual customer (Piccoli et al., 2003; Payne & Frow,

2005) that is a fundamental part of CRM strategies due to that customers

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value the factors that constitute a relationship differently based on their

personal perspectives and earlier experiences (Babin, Darden & Griffin,

1994; Garbarino & Johnson, 1999; Reichheld & Teal, 1996). The key

objective with CRM is to achieve loyal customers (Rigby, Reichheld &

Dawson, 2003) by treating them in a customized manner that strives to create

a personal bond between the company and the customer (Özgenera & Iraz,

2006). According to Rauyruen & Miller (2007) customer loyalty is expressed

through customer retention and positive word-of-mouth communication

expressed by the customer. The importance of customer loyalty is widely

known throughout the literature and has been demonstrated in a study

conducted by Rigby, Reichheld & Dawson (2003). In their study they

investigated the importance of customer loyalty within more than 200

companies from a wide range of industries and concluded that a five percent

increase in customer retention could increase the profits of a company with

up to 95 percent.

It is crucial for companies to achieve customer retention since it is up to six

times more expensive to acquire a new customer than it is to retain a current

one (Rosenberg & Czepiel, 1984). Customer retention is described by Boles,

Barksdale & Johnson (1997) as the company’s ability to both attract and

retain customers and is expressed as when the customer purchase from the

company repeatedly. The second feature of customer loyalty is word-of-

mouth communication and is recommendations expressed by a customer to

others where the strength in this type of communication originates from that

personal communication is considered more reliable than non-personal

communication (Zeithaml & Bitner, 1996). It is of great value for companies

to have such loyal customers that they spread positive word-of-mouth about

the company and recommend the company to others since such

recommendations function as valuable promotion because it does not involve

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any costs for the company. According to Huang et al. (2009) customer

loyalty represent the outcome part of the relationship, which according to

Arnett & Badrinarayanan (2005) as well as De Wulf, Odekerken-Schröder &

Iacobucci (2001) is the result of the company´s ability to achieve satisfaction,

trust and commitment among its customers, mentioned throughout the

literature as relationship quality.

1.2 The Industry of Speciality Stores

This thesis will treat the industry of Speciality Stores that according to the

Global Industry Classification Standard (GICS) is a sub-industry within the

industry Speciality Retail. Speciality Retail is one of four industries within

retailing that in turn is included in the sector of Consumer Discretionary.

Speciality Stores is defined as retailers who distributes single products or

services and is thus specialized in a niche market (Morgan Stanley Capital

International, 2002).

1.3 Problem Discussion

In the contemporary market, retail companies face new challenges due to the

increased competition and saturation in the market (Anderson, Jolly &

Fairhurst, 2007). Due to these conditions companies within retailing started

to seek competitive advantages through relationship marketing activities with

the main objective of customer loyalty (Anderson, Jolly & Fairhurst, 2007).

Throughout the literature the accomplishment of customer loyalty, expressed

in terms of customer retention and word-of-mouth communication, is derived

from the company´s ability to achieve satisfaction, trust and commitment

with the customer (Arnett & Badrinarayanan, 2005; De Wulf, Odekerken-

Schröder & Iacobucci, 2001). However, even if there is a general

understanding about these relationships throughout the literature there are

authors that do not agree. Hennig-thurau & Klee (1997); Reichheld &

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Aspinall (1993) as well as Bloemer & Poiesz (1989) mention that the

relationship between customer satisfaction and retention is weak or even non-

existing. Further, Ranaweera & Prabhu (2003) mean that trust is a weak

predictor of customer retention. Simultaneously, Evanschitzky et al. (2006)

mention that it cannot be determined whether a direct relationship between

commitment and customer retention exists or not. Continuing, Gripsrud

(2002) states that the contemporary media society is under constant

development where customers today express themselves through media

channels such as social media. This would mean that the availability of

spreading word-of-mouth communication has become easier and more

convenient for customers, which constantly changes the conditions for

companies to achieve word-of-mouth communication. This in turn means that

the relationship between word-of-mouth communication and customer

satisfaction, trust and commitment changes due to rapid changes in the media

society.

Although a general understanding is that customer satisfaction, trust and

commitment leads to customer loyalty, it is unclear whether they are equally

important or if one of these components stronger contributes to customer

loyalty than the others. This knowledge would be of great value for retail

companies since this would give them the ability to understand what specific

component of the relationship that achieves a certain outcome of customer

loyalty. This means that a company that possesses this type of knowledge

could tailor their relationship-building activities in order to achieve either

customer retention or word-of-mouth communication depending on what is

needed in the company´s current situation.

Zemke & Schaff (1990) mean that the industry of Speciality Stores is of a

homogeneous nature due to the fact that the products and services offered are

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of similar character. This should mean that customers within this industry

have the opportunity to switch between competing companies without

compromising quality of what is offered since the companies provide similar

products and services. Gagliano & Hathcote (1994) as well as Zemke &

Schaff (1990) mention that the most important attribute for companies within

the industry of Speciality Stores is to have outstanding customer service in

order to achieve loyal customers. This means that relationship-building

activities with the objective of gaining loyal customers is not only an

important activity for companies within this industry, instead such activities

should be seen as vital to stay competitive and prevent customers from

switching to competitors. The consequence of this reasoning should be that if

relationship-building activities is a central part of Speciality Stores, there

should exists extensive published material in relation to the subject.

However, throughout the literature a limited amount of material is written in

the area of Speciality Stores that treat relationship-building activities within

this specific industry. Simultaneously, the limited literature yet available is

outdated since the material is published in the 90´s. There is reason to believe

that the conditions described in the outdated literature is not applicable in the

contemporary market since Pan & Lee (2003) mention that the emergence of

the Internet, e-commerce and social media has totally changed the

relationship between the company and its customers.

In accordance with the above reasoning, it is known that customer

satisfaction, trust and commitment as parts of relationship quality have some

impact on the outcome of the relationship in form of customer retention and

word-of-mouth communication. Further, Speciality Stores operates in an

industry where a homogeneous market, characterized by high competition

and disloyal customers, requires that companies within this industry

understand how the relationship with the customer could be constructed in

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order to achieve customer loyalty. The justification for this thesis is derived

from that it is known but not explicitly explained how customer satisfaction,

trust and commitment affect customer retention and word-of-mouth

communication. The selection of industry is motivated based on that long-

term relationships with customers within this industry are essential for

companies to stay competitive and is to date not adequately investigated.

1.4 Purpose

The purpose of this thesis is to explain how satisfaction, trust and

commitment impacts customer retention and word-of-mouth communication

within the industry of Speciality Stores.

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Chapter 2. Literature Review

2.1 Customer Relationship

The primary focus of marketing should be to emphasize the exchange of

relationships (Ferber, 1970; Hunt, 1983; Kotler, 1972). According to Berry

(2002) this mind-set in marketing is about establishing relationships with the

customers in order to have the ability to transform them into loyal customers.

Berry (2002) states that it is about moving away from the former approach

that is reflected in the outdated transactional marketing approach that merely

was about attracting customers without thinking about the long-term value

the customer could have for the company.

There is no overall definition of relationship marketing in the literature, but

there is a general understanding about its purpose. The goal with relationship

marketing is about attracting, maintaining and enhancing relationships with

customers (Berry, 2002; Grönroos, 1989; Rapp & Collins, 1990). The

establishment of successful relationships with customers results in many

benefits for the company both in terms of competitive advantages in the

marketplace (Day, 2000; Hunt, 1997) as well as financial benefits (Boles et

al., 2000; Walter and Gemünden, 2000) due to the fact that it is up to six

times more expensive to acquire a new customer than to retain a current one

(Rosenberg & Czepiel, 1984).

The development of relationships with customers is characterized by the

relationship quality as well as the relationship outcome (Badrinarayanan,

2005). Relationship quality is the customer’s perception of the degree his

expectations of the relationship is fulfilled by the company, i.e. the overall

strength of the relationship (Garbarino & Johnson, 1999). The most frequent

constructs used to measure relationship quality involve customer satisfaction,

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trust, and commitment (Arnett & Badrinarayanan, 2005; Baker, Simpson &

Siguaw 1999; De Wulf, Odekerken-Schröder & Iacobucci, 2001; Dorsch,

Swanson & Kelley 1998; Garbarino & Johnson, 1999; Palmer and Bejou

1994; Smith 1998). The relationship outcome aspect of customer

relationships determines what the relationship between a customer and a

company leads to (Huang et al. 2009; Hennig-Thurau, Gwinner & Gremler,

2002). The most frequent construct used to describe the outcome part of a

relationship is customer loyalty (Caceres & Paparoidamis, 2007; Hennig-

Thurau, Gwinner & Gremler, 2002; Zeithaml, Berry & Parasuraman, 1996).

2.2 Satisfaction

Customer satisfaction is according to Anderson & Sullivan (1993) about

meeting customer expectations as well as maintaining high perceived quality.

MacNealy (1994) mean that the most important aspect of customer

satisfaction is to meet the expectations of the customers, while Churchill &

Suprenant (1982); Johnson & Fornell (1991); Oliver & DeSarbo (1988)

argues that the customers’ evaluation of how the company delivers the

offering, i.e. the perceived quality, is the key to achieve satisfaction.

Anderson & Sullivan (1993) mean that there is no consistent understanding in

the literature of which one of these two factors that have the greatest impact

on customer satisfaction, but that most studies have shown that perceived

quality is more important than expectations. Fornell et al. (1996) agree with

this reasoning when stating that the degree of satisfaction depends on the

customers overall perception of the quality that the company delivers,

including the quality of the offering, the service features of the company, as

well as the performance of the sales personnel. In this way, it is crucial for a

company to strive to deliver high quality in all aspects of the relationship

both regarding the physical offering as well as service to obtain satisfied

customers and healthy relationships.

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Customer satisfaction is according to Blackwell, Miniard & Engel (2006) one

of the most important aspects for companies to strive for, and should be seen

as one of their greatest assets to build relationships with its customers.

Customer satisfaction has long been recognized as a key aspect for

companies to achieve long-term success and to stay competitive in the

marketplace (Hennig-Thurau & Klee, 1997). Why customer satisfaction is

important in the relationship with the customers is according to Rust &

Zahorik (1993) as well as Kotler (1994) because it has proven to be a big part

of why customers chose to return to the company. Hennig-Thurau & Klee

(1997) state that customer retention is important for companies to be able to

reach customer loyalty that results in that customers repeatedly purchase

from the company. Anderson & Fornell (1994) as well as Rust & Zahorik

(1993) argue that there is a clear correlation between customer satisfaction

and customer retention. If a customer is satisfied it often leads to retention

that in turn results in positive effects on profitability for the company

(Anderson & Fornell, 1994; Rust & Zahorik, 1993). It is well known that

customer satisfaction results in many benefits for the company, Zineldin

(2000) states that it results in lower price sensitivity among the customers,

that they become more loyal to the company, as well as they purchase more

goods from the company.

Hansemark & Albinsson (2004) state that the concept of customer

satisfaction consists of the components service quality, service features, and

customer complaint management. These components together function as a

way to achieve satisfaction among customers and is thus a way for the

company to maintain high perceived quality. Other authors also support that

these components are a way for a company to maintain high perceived

quality. McDougall & Levesque (1994) as well as Morgan & Piercy (1992)

state that the provision of service quality is a way to achieve customer

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satisfaction. Further, Lavesque & McDougall (1996) also argue for the

importance of delivering superior service features to reach satisfaction among

customers. Johnston (2001) as well as Nyer (2000) additionally states that

customer satisfaction can be achieved with the implementation of customer

complaint management.

2.2.1 Service Quality

Service quality consists of two aspects that are the outcome aspect of the

service and the relational aspect of the service (McDougall & Levesque,

1994; Morgan & Piercy, 1992). The outcome aspect of the service is the

providing of the core service by the company and the relational aspect of the

service is the relationship between the customer and the service provider

(McDougall & Levesque, 1994; Morgan & Piercy, 1992). Concerning the

outcome aspect of the service, Parasuraman, Berry & Zeithaml (1991) mean

that when providing the core service to the customer, it is important for the

service provider to demonstrate accuracy and to convey reliability to

proclaim that he cares about the customers. Concerning the relational aspect

of the service, it is of importance for the service provider to show empathy,

confidence, and responsiveness to the customers (Parasuraman, Berry &

Zeithaml, 1991).

2.2.2 Service Features

Competing with merely goods and services is according to Pine & Gilmore

(1999) no longer enough to achieve customer satisfaction in the increasingly

commoditized market of today. Pine & Gilmore (1999, p. 18) states that

companies need to develop their service offerings to “deliver memorable

events that engage customers in inherently personal ways”. Pine & Gilmore

(1999) mean that rather than simply meeting the customer’s expectations, the

company should strive to exceed those expectations, which they call

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customer surprise. Lavesque & McDougall (1996) mean that convenience

and accessibility are two key elements when it comes to develop superior

service offerings to the customers. A good example of this is mentioned by

Hansemark & Albinsson (2004) that describes extended hours of operations

as a way to exceed the customers predetermined expectations of the service

offering and to make it more accessible for the customers.

2.2.3 Customer Complaint Management

Why customers choose to switch between companies is according to Hart,

Heskett & Sasser (1990) because the service supplier doesn't provide

adequate customer complaint management. Johnston (2001) as well as Nyer

(2000) mean that if the company advocates complaint management, and

allow and encourage customers to file complaints on the service quality, it

will increase customer satisfaction. According to Nyer (2000) this has shown

to be most effective among the customers that are most dissatisfied and

among those customers that file complaints most intensely. Customer

complaint management is also mentioned by Andreassen (2000) as well as

Spreng, Harrell & Mackoy (1995) but then as a part of service recovery.

Spreng, Harrell & Mackoy (1995) arguing that if a company encourage

customer to file complaints about the service level, the customers will be

more satisfied. This encouragement will according to Spreng, Harrell &

Mackoy (1995) lead to service recovery that in turn will result in customer

retention.

2.3 Trust

According to Rotter (1967, p. 664) trust is described as “a generalized

expectancy held by an individual that the word of another can be relied on”.

Another definition is provided by Moorman, Deshpande, & Zaltman (1993,

p. 82) who define trust as the “willingness to rely on an exchange partner in

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whom one has confidence”. The mutuality of these definitions is that they

both describe trust as an expectancy given by one party to another based on

the perception that the party can be relied on. Morgan & Hunt (1994); Berry

& Parasuraman (1991); Thomas & Skinner (2010); Sirdeshmukh, Singh &

Sabol (2002) all describes that trust is a key aspect in building relationships

and Morgan & Hunt (1994) states that trust therefore should be one of the

main cues in relationship marketing activities to build successful

relationships with customers. According to Moorman, Zaltman, & Despande

(1992) as well as Ganesan & Hess (1997) trust in relationships reduces

perceived uncertainty of risk between the parties involved in a relationship.

By this, Moorman, Zaltman, & Despande (1992) as well as Ganesan & Hess

(1997) mean that one party might experience some type of risk or uncertainty

and that the other party by being trusted can reduce this perception of risk

and uncertainty in a given situation. Further, Lambert, Emmelhainz, &

Gardner (1999) suggest that trust is so crucial for the establishment of

relationships that it is very difficult to create long-term relationships without

the presence of trust between the parties.

Cox (2004) mentions that difficulties exist in building relationships because

complications can occur between the parties in a relationship that in turn

damages the established trust. Cox (2004) states that the parties in a

relationship generally have different intentions with the relationship e.g. a

company’s intention (maximum profit) and the customers’ intention

(benefits) that can create conflict if one party experience unevenness between

the parties and feel that the other party takes advantage in the situation. In

buyer-seller relationships trust can according to Ganesan & Hess (1997) be

divided into two dimensions. First, Ganesan & Hess (1997) state that one

type of trust exists between individuals and other individuals mentioned as

interpersonal trust. Interpersonal trust is the trust that exists between for

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example the sales representative and a customer to a company. Secondly,

Ganesan & Hess (1997) state that a second type of trust exists between

individuals and the company as a whole. Ganesan & Hess (1997) mention

this type of trust as organizational trust. By this discussion Ganesan & Hess

(1997) mean that an individual possesses two main perceptions of trust

towards a company, one being the interpersonal towards the employees and

one organizational trust towards the company. According to Dwyer, Schurr,

& Oh (1987); Bhagat (2009); Morgan & Hunt (1994) trust is built upon the

concept of shared values between the parties in the relationship. Further,

Morgan & Hunt (1994) adds the concept of communication and opportunistic

behavior as important building blocks for trust in relationships.

2.3.1 Shared Values

According to Morgan & Hunt (1994) the concept of shared values functions

as the starting point for building trust in relationships. Morgan & Hunt (1994)

mean that shared values represent the opinions an individual have about

behaviors, goals and also includes the perception of what is right and wrong.

Morgan & Hunt (1994) states that from the individuals’ perspective the

values are affected by past experiences that have formed the individual to

become whom they are today. From the companies perceptive, Morgan &

Hunt (1994) mean that the values are expressed in the organizational culture

that reflects what the company stands for. The organizational culture

represents what the company is and function as a base when the individual

evaluates if the values of the company and the individual match.

Morgan & Hunt (1994) mean with the concept of shared values the individual

can either identify, agree with the values of the company, or the individual

can reject the values and thereby disagree, this is mentioned as customer

identification. Another aspect is also added by Morgan & Hunt (1994) as

internalization, which means that the individual assumes the values of the

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company and become a part of them. Of these different types of associations

Morgan & Hunt (1994) mean that internalization is the strongest form of

shared values. Bhattacharya & Sen (2003) mentions that customers who are

attracted to a company’s identity are likely to be more appealed to the

company when they feel that the company matches who they are.

2.3.2 Communication!

Morgan & Hunt (1994) mention the concept of communication as a second

building block for trust. Morgan & Hunt (1994) state that the formal and

informal communication from the company is a factor that affects how

meaningfulness can be created in relationships. Morgan & Hunt (1994) mean

that the frequency, quality and reliability determine how the communication

affects trust in relationships.

Rempel, Holmes & Zanna (1985) as well as Hovland, Janis & Kelley (1953)

also mention the reliability aspect of communication and mean that the

partners’ ability to keep its promise and demonstrate competence is the

underlying influence of trust in communication. According to Ganasan &

Hess (1997) reliability has a significant affection on the interpersonal trust

that exists between a sales representative and an individual. By this, Ganasan

& Hess (1997) mean that the concept reliability affect the relationship

between individuals to a further extent than the relationship between

individuals and organizations and it is therefore important that the sales

representatives gives a credible behavior where they demonstrate competence

to create trust.

2.3.3 Opportunistic Behavior

Morgan & Hunt (1994) as well as Rempel, Holmes & Zanna (1985) mean

that trust in relationships is also affected by what is mentioned as

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opportunistic behavior. Opportunistic behavior is when a party in the

relationship violates the implicit or explicit promises that the relationship

consists of, mentioned as violation of promises. Morgan & Hunt (1994) mean

that a relationship is consisted of certain promises between the parties and

that a violation of these promises leads to a decrease of trust since one party

feels exploited in the relationship.

Rempel, Holmes & Zanna (1985) describes that behavior characterized by

concern for the other party in the relationship builds trust and mention this

behavior as benevolence. Ganasan & Hess (1997) mean that the dimension of

benevolence affects organizational trust. By this Ganasan & Hess (1997)

mean that trust between customers and the company is foremost affected by

the company’s ability to convince the customer that the company is willing to

sacrifice something extra or unexpected to satisfy the customer. Cox (2004)

also discusses a similar issue when proposing that trust is damaged if

complications occur between the companies’ intentions (maximum profit)

and the customers’ intention (benefits) and the customers feel utilized in

some way.

!2.4 Commitment

Morgan & Hunt (1994) as well as Anderson & Weitz (1992) describe

commitment as a complex concept and that it is a connection between two

parties whom both strives towards an establishment of a relationship that will

have a long-term duration. Moorman et al. (1992) adds that customer

commitment is a physiological force and that the customer while committed

is linked to the company in which he does business with. Allen & Meyer

(1997) states that commitment is a physiological state and that people can

establish two different forms of commitment. Attitudinal commitment is one

and refers to a personal attachment towards an organization, union or

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occupation. Behavioral commitment is the other and indicates some kind of

action taken by the person, which can be continuing membership, policies or

goals (Allen & Meyer, 1997).

According to Gundlach et al., (1995) as well as Morgan & Hunt (1994)

commitment is seen as a key variable for establishing a relationship that in

turn will result in customer retention and loyalty towards the company.

Fornell & Wernerfelt (1987) explain the importance of building commitment

in a relationship, as commitment will lead to loyal customers that in turn will

result in higher profit for the company because the company will remain

current customers. Dick & Basu (1994) agree with the already mentioned

aspects of why commitment is important but is also adding that committed

customer will spread positive information or opinions about the company and

that it is a fact that committed customer will purchase more and because of

that company with committed customer increase their sales.

Allen & Meyer (1990) as well as Mathieu & Zajac (1990) states that there are

two main types of commitment and that they both include different aspects of

why people become committed. These types of commitment are called

affective commitment and continuance commitment. Gundlach et al. (1995)

explains affective commitment as a mixture of attitudinal loyalty,

involvement and attachment. When relationship is built on continuance

commitment, Fullerton (2005) proclaims that customers identify themselves

with the company, feel a personal bond and an emotion of familiarity

connected to the company. This identification results in that the customer

recommends the company to their friends. According to Fullerton (2003)

continuance commitment is when a customer remains committed to a

company because of high switching costs and/or scarcity of alternatives.

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Meyer & Herscovitch (2001) further state that a third type of commitment

mentioned as normative commitment can be added to the concept of

commitment. Normative commitment refers to the moral attachment that the

customer feels towards a company and that customers feel indebt to join

companies that they have shared values with. Companies who create

normative commitment among its customers naturally gain customer

retention. Customer retention is created due to the concept of reciprocity,

which refers to the customer’s willingness of repay the company if they feel

that they owe the company in some aspect (Cialdini, 2007; Meyer &

Herscovitch, 2001). Cialdini (2007) further explains that the repayment does

not need to be returned in the same way that it was given in order to be

successful. In fact, Edlund et al. (2007) proclaims that the most effective way

of using the concept of reciprocity is when the customer only have one single

way to repay the company, in other words to buy products from that

particular company assortment.

Anderson & Weitz (1992) states that a relationship built on commitment will

have a long-term duration and will be meaningful in the way that the

customers will preserve the relationship with the belief that the relationship

needs effort and attention. According to Dagger, David & Ng (2011)

customer commitment affects the relationship between a customer and a

company positively as long as the company cherishes the customer by

providing confidence and offer both social and special benefits. Malhotra,

Budhwar & Prowse (2007) states that these benefits also can be described as

rewards in the relationship that in some way provides the customer with

financial or other tangible or intangible benefits that is received from being in

a relationship. Malhotra, Budhwar & Prowse (2007) further uses the same

approach as MacMillan et al. (2005) when stating that rewards can be divided

into extrinsic and intrinsic types and that rewards in the same way as benefits

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affect all types of commitment mentioned by Allen & Mayer (1990). Dagger,

David & Ng (2011) proclaims that providing customers with benefits is

especially important during the first stage of relationship building. Gwinner

et al. (1998) also proclaims that benefits affect the level of commitment and

that it is one of the main parts of a successful relationship. Gwinner et al.

(1998) states that relationship benefits can be divided into three different

groups, confidence benefits, social benefits and finally special treatments

benefits.

2.4.1 Relationship Benefits

Confidence benefits is the first type of relationship benefits and will

according to Gwinner et al. (1998) result in security and comfort for the

customer. With this, Gwinner et al. (1998) mean that the company must keep

their promises and protect customer privacy in order to gain their confidence

and create commitment. This type of benefits is also mentioned by

MacMillan et al. (2005) who call it intrinsic benefits that are inherent in the

relationship and are intangible for the customer.

The second type of relationship benefits is social benefits that give the

customer an emotion of familiarity and friendship. Gwinner et al. (1998)

mean that companies must support their customers and help them in their

decisions in order to appear friendly and helpful. MacMillan et al. (2005)

appeal this type of benefits as intangible benefits that also leads to

commitment among the customers. Li & Dant (1997) proclaims that this type

of benefits is psychological attached and that it gives the customer a feeling

of guilt if they just receive benefits without giving something back. Social

benefits will because of this most likely result in positive re-purchasing

behavior among the customers.

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The third type of benefits is special treatment benefits and refers to economic

advantages and product advantages for the customer. Gwinner et al. (1998)

states that such benefits is the most tangible ones for the customer and can

occur as cost savings/lower prices in form of physical products and/or

tailored offers for the customer, which will lead to loyalty and commitment

among the customers. MacMillan et al. (2005) states that such benefits are

important as activity during the first stage of relationship building and call it

extrinsic benefits that occur in a more material form than other types of

benefits.

2.4.2 Switching Costs

Bendapudi & Berry (1997); Dwyer et al., (1987) as well as Gundlach et al.,

(1995) proclaims that customers become committed to a relationship if there

are distinct switching costs that makes it difficult for customers to switch

between different companies. Jones, Mothersbaugh & Beatty (2002) states

that switching costs exists as a multidimensional nature and uses their own

new reasoning’s together with already known ones in order to categorize

switching costs into several different groups depending on how it affects the

customer. Jones, Mothersbaugh & Beatty (2002) states that continuity costs

are associated with the perceived risk of switching from a known company to

an unknown.

Search costs are another group that Jones, Mothersbaugh & Beatty (2002)

presents and is related to the customers searching for another company,

which demands both time and effort. Setup and sunk costs are the last two

groups that Jones, Mothersbaugh & Beatty (2002) themselves states and are

associated with the first time customers involved with the company and the

emotional attachment that must be replaced when customers are switching

company. Guiltinan (1989) mentions another group called contractual costs

that are related to fees and if the customer will suffer any charges for leaving

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or entering a company. Fullerton (2005) proclaims a negative aspect of

building relationships with this type of switching costs. If the customer is

economically charged for having a relationship with a company or if mistakes

caused by the customer can result in fees, Fullerton (2005) mean that this can

result in that the customer feel trapped in the relationship and will not

recommend the company further. The last group of switching costs is

learning costs and is according to Heskett (1990) associated with the need of

knowledge about a company´s assortment, employees or design.

2.4.3 Scarcity of Alternatives

Gierl & Huettl (2010) as well as Cialdini (2007) mean that scarcity is an

important marketing tool or instrument since customers tend to value objects

more if they are limited or hard to get hold of and that this contributes in

keeping the customer interested in the company. Gierl & Huettl (2010) states

that scarcity occurs with both limited supply and high demand. Scarcity can

thus be accomplished through limited edition products or as a result of high

demand for the product who have an exclusively status, called exclusive

products. According to Cialdini (2007) limited editions results in that things

become less accessible and the customer lose their freedom of choices to

some extent. This less freedom will result according to Cialdini (2007) that

customer tends to want it more than before and that new scarce products are

more wanted among the customer than those that already were restricted.

Cialdini (2007) also states that products become more exclusive and wanted

if the customers compete against each to get them or if the products are only

available during a limited time.

2.4.4 Shared Values

Morgan & Hunt (1994) proclaims that shared values in a relationship occurs

when the involved parties have the same beliefs about what is right or wrong,

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important or unimportant and also appropriate or inappropriate. Chatman

(1991) also state that shared values are a direct precursor for both

commitment and trust. Kashyap & Sivadas (2012) explains shared values as

a social influence when one source influences a target audience. This

influence occurs when one party accept that another influence them because

the values from that party is congruent with their own values. Sharing of

values is an important feature when building commitment in a relationship

since that type of similarity between the company and the customer can

provide directions for organizational goals, strategies and policies. Kashyap

& Sivadas (2012) further proclaims that committed customers have a desire

to continue the relationship with that company. Such relationships imply an

emotion of solidarity and cohesion among the customers that over time

results in that the shared values between the company and the customer

becomes even more similar.

2.5 Customer Loyalty

According to Chaudhuri & Holbrook (2001) as well as Edvardsson et al.

(2000) customer loyalty is defined as the customer´s willingness to

repurchase the products or services provided by the company. Zeithaml,

Berry & Parasuraman (1996) also adds the willingness to recommend the

company and the act to encourage other consumers to enact the company.

Customer loyalty is a primary goal of customer relationships (Sheth, 1996)

which could be explained by that it is up to six times more expensive to

acquire a new customer than it is to retain a current one (Rosenberg &

Czepier, 1984). Customer loyalty consists of the aspects customer retention

and the customers’ willingness to recommend the company through word-of-

mouth communication (Zeithaml, Berry & Parasuraman, 1996; Czepiel, 1990;

Fornell & Wernerfelt, 1987; Hennig-Thurau, Gwinner & Gremler, 2002;

Rauyruen & Miller, 2007).

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2.5.1 Customer Retention

According to Boles, Barksdale & Johnson (1997) customer retention is the

process that describes a company’s ability to attract and retain customers.

Gerpott et al. (2001) continues by defining customer retention as when a

customer continues to do business with a company or purchase from the same

company repeatedly. Crosby, Evans & Cowles (1990) states that customer

retention is one main part of the outcome of a strong relationship between a

customer and a company. To achieve retention among its customers, it is

crucial for the company to exceed the customer’s expectations in order to in

turn reach customer loyalty (Boles, Barksdale & Johnson, 1997). Retention of

customers can according to Bowman & Narayandas (2001) as well as De

Wulf, Oderkerken-Schröder & Iacobucci (2001) be addressed by asking

customers to report the number of purchases they made in relation to a

specific brand. Further, Verheof (2003) developed the measurability by

addressing how many products of that specific group of products that has

been purchased from that specific company, also mentioned as extent of

purchases.

2.5.2 Word-of-Mouth Communication

According to Anderson (1998); Richins (1983); Herr, Kardes & Kim (1991)

as well as Haywood (1993) word-of-mouth communication is defined as

informal communication between customers and others concerning

evaluations of products or services. Word-of-mouth communication is an

important tool for the company to attract new customers and thus create

loyalty (Grönroos, 1990; Morgan & Hunt, 1994). Word-of-mouth

communication is expressed as a recommendation from one customer to

others where the strength in the communication derives from that personal

communication is considered more reliable than non-personal communication

(Zeithaml & Bitner, 1996). It can thereby be stated that informal

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communication from one customer to another can outweigh the formal

communication from a company. Word-of-mouth communication can be

direct recommendations about a product or service (Fullerton & Taylor,

2002) but also the sharing of thoughts of an entire brand (Maru File, Cermak

& Prince, 2004).

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Chapter 3. Conceptual Framework 3.1 The Relationships Between Relationship Quality and Relationship Outcome Within the Industry of Specilaity Stores 3.1.1 Satisfaction and Customer Retention

In marketing literature customer satisfaction is typically described as the way

to achieve customer retention (Kotler, 1994; Fornell, 1992; Reichheld &

Sasser, 1990). However, Hennig-thurau & Klee (1997); Reichheld &

Aspinall (1993) as well as Bloemer & Poiesz (1989) mention that the

relationship between the satisfaction and retention is weak or even non-

existing. Due to this ambiguity and the fact that the literature in this area is

outdated, the following hypothesis is stated:

H1: Satisfaction has a positive impact on customer retention

3.1.2 Satisfaction and Word-of-Mouth Communication

Previous studies have shown a strong association between customer

satisfaction and word-of-mouth communication (Ladhari, 2007; Ranaweera

& Prabhu, 2003, Kim, Ng & Kim, 2009; Bitner, 1990; Oliver, 1980; Bloch,

1986; Reichheld & Sasser, 1990). However, Gripsrud (2002) mention that the

contemporary media society is under constant development where customers

today express themselves through media channels such as social media. Due

to this, it is of great importance to continuously investigate the phenomena of

word-of-mouth communication with regard to the development described by

Gripsrud (2002). The following hypothesis is stated:

H2: Satisfaction has a positive impact on word-of-mouth communication

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3.1.3 Trust and Customer Retention

Previous studies have indicated that trust is likely to influence the retention of

customer (Kassim & Abdullah, 2010). However, Ranaweera & Prabhu

(2003) have shown that this type of trust is the foremost driver of customer

retention when it comes to business-to-business relationships. Ranaweera &

Prabhu (2003) further states that in the context of company to customer

relationships trust is found to be a weak predictor of retention. Due to this the

following hypothesis is stated:

H3: Trust has a positive impact on customer retention

3.1.4 Trust and Word-of-Mouth Communication

Throughout the marketing literature few studies have investigated and

demonstrated a relationship between trust and word-of-mouth communication

(Ranaweera & Prabhu, 2003). However, in a study conducted by Ranaweera

& Prabhu (2003) it is suggested that trust is just as important as satisfaction

to achieve word-of-mouth communication. Due to this the following

hypothesis is stated:

H4: Trust has a positive impact on word-of-mouth communication

3.1.5 Commitment and Customer Retention

Brown & Petersson (1993); Morgan & Hunt (1994) as well as Fullerton

(2003) mention that commitment is an antecedent for customer retention.

However, the impact between commitment and customer retention is

according to Evanschitzky et al. (2006) not rigorously investigated in the

marketing literature. According to Evanschitzky et al. (2006) it cannot be

determined whether a direct relationship between the concepts exists or not.

Due to this uncertainty the following hypothesis is stated:

H5: Commitment has a positive impact on customer retention

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3.1.6 Commitment and Word-of-Mouth Communication

Throughout the marketing literature few studies have investigated and

demonstrated a relationship between commitment and word-of-mouth

communication. However, in a study conducted by Fullerton (2003) it is

suggested that commitment can have a negative effect on the customer´s

willingness to spread word-of-mouth communication if the customer feels

trapped in the relationship with the company. Simultaneously, Dick & Basu

(1994) as well as Harrison-Walker (2001) mention that customers that feel

committed towards a company will spread word-of-mouth communication

about that specific company. Due to this uncertainty the following hypothesis

is stated:

H6: Commitment has a positive impact on word-of-mouth communication Figure 1. Hypotheses Model

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Chapter 4. Methodology

4.1 Research Approach

4.1.1 Inductive vs. Deductive Research

In research there are typically two types of research approaches that includes

an inductive and a deductive research approach. An inductive research

approach means that the researcher begins the forming of theoretical

knowledge with an observation of an event (Bryman & Bell, 2011). On the

basis of this observed event the researcher strives to draw generalizable

conclusions by interpreting what is observed through the event and thus

create a theory of understanding. With this understanding an inductive

process begins with an observation and results in a theoretical understanding

(Ghauri & Gronhaug, 2010).

A deductive research approach means that research is based on what is

already known about a particular subject, and which theoretical

considerations that is important in relation to that subject. This means that the

researcher begins by creating an understanding of the given subject by

creating a theoretical framework (Bryman & Bell, 2011). From this

framework it is possible for the researcher to set up hypotheses that further

can be tested through gathered empirical data. The formulated hypotheses are

then either supported or not supported by the research that results in that the

theory from which the hypotheses originated from is revised based on the

new knowledge (Ghauri & Gronhaug, 2010).

Considering the purpose of this study, were hypothesis are extracted from

already existing theoretical knowledge, the study cannot naturally implement

an inductive research approach where theoretical understanding is derived

from empirical data. The appropriate approach implemented in this study is

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the deductive research approach since the study examines theoretical

concepts with empirical data. This study begins with a foundation of

theoretical knowledge further examined through an empirical investigation

that further supports the justification for the applied research approach.

4.1.2 Qualitative vs. Quantitative Research

In research there are further approaches in addition to the inductive and

deductive perspective to take into account for the researcher including a

qualitative and a quantitative research approach. A qualitative research

approach is an approach where the research uses a small number of

respondents to make it possible to gain in-depth information to reach an

understanding about a more complex problem under investigation (Ghauri &

Gronhaug, 2010). This approach is most suited when examine complex

situations where attitudes and beliefs among the respondents constitute what

is under investigation. In qualitative research the analysis is merely

constructed based on the interpretation of the findings in the empirical

investigation (Bryman & Bell, 2011; Ghauri & Gronhaug, 2010).

A quantitative research approach is generally characterized by a small

amount of studied variables on a larger scale of respondents. This approach

typically means that a population is examined by investigating a sample of

that population. The findings gained from that sample represent the entire

population and the findings of the sample can thus be generalized across this

population. To enable a generalization across the population it is important

that the research is carried out in a standardized and structured way and also

in measureable terms. In order to present the findings in a formalized manner

the findings need to be measurable and presentable in statistics. (Bryman &

Bell, 2011)

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In this study a quantitative research approach is implemented since the

purpose of this study is to gain knowledge about an entire population. This

could also be achieved with a qualitative research approach. However,

findings of qualitative character cannot be analyzed statically and presented

in numbers since the problem at hand are investigated deeply with a smaller

number of respondents. This results in that qualitative research cannot

achieve generalizability to the same extent as a quantitative research

approach where the results are supported statistically (Yin, 2003). Further,

this study strives not to gain deeper knowledge about the studied variables

but to assess the relationship between the variables to support or reject the

hypothesis in this study.

4.2 Research Design

There are mainly three types of designs to take into account when planning a

research project. These types of designs include exploratory, causal, and

descriptive research designs (Bryman & Bell, 2011; Ghauri & Gronhaug,

2010). Exploratory research design is according to Bryman & Bell (2011)

normally used in the beginning of a research project to identify potential

problems with the upcoming research. This type of research aims to clarify if

the intended research direction is viable or not. The aim of causal research

design is according to Bryman & Bell (2011) to describe how variables affect

and cause other studied variables to change and impact each other. This type

of research design is thus a way of predicting how changes among variables

may affect and cause others but demands that the researcher have the ability

to control the independent studied variables in order to ensure that the result

can be supported. Descriptive research design deals with everything that can

be statistically measured and counted numerically in a study. Therefore

descriptive research is also known as statistical research and can with

gathered data describe characteristics of a population or phenomenon. The

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aim with this type of research is to answer who, what, where, when, how, and

why questions (Bryman & Bell, 2011).

Descriptive research can further be divided into two separate research

designs, called cross-sectional research design and longitudinal research

design (Bryman & Bell, 2011; Ghauri & Gronhaug, 2010). A cross-sectional

research design is when the researcher implement several cases

simultaneously to gather data from. This approach is used to find patterns in

the gathered data to make it possible to see relationships between the

different variables under investigation (Ghauri & Gronhaug, 2010). A

longitudinal research design is when the researcher implement single cases

for an extended period of time. This approach is used to find changes in

variables by studying them over a longer period of time (Ghauri & Gronhaug,

2010). This approach is according to Bryman & Bell (2011) costly in terms

of time, money and resources since it requires more than one occasion to

collect data.

In order to find the appropriate research design for this study the available

research designs had to be considered. First, the exploratory research design

was excluded since the problem and research questions in this study are

stated and need no further exploration or direction in order to be determined

for further research. Secondly, a casual research design was considered and

excluded since the authors could not control the independent variables

fundamental for achieving a causal research design. A descriptive research

design is used in this study since it is most suitable due to the characteristics

of the purpose of the study. The purpose of this study is to explain how

satisfaction, trust and commitment impacts customer retention and word-of-

mouth communication, this can thus be examined through a descriptive

research design that becomes suitable. Further, a single cross-sectional

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research design was chosen due to the limited availability of time, money and

resources.

!4.3 Data Sources

There are two different types of sources of information that are commonly

used in research. These types of data sources include secondary and primary

data. Secondary data is information collected with another purpose than to

help answer the specific problem at hand. This type of data can further be

divided into internal and external secondary data. Internal secondary data

derives from inside an organization and is internal information such as

strategy documents and annual reports. External secondary data is

information from any type of external source where information gathered for

another purposes can be used as empirical information to answer the specific

problem under investigation. This type of data is for instance information

from other studies, social media, and governmental institutes (Bryman &

Bell, 2011). An advantage of secondary data is that the data is already

available which can save time and money. Secondary data also provides the

possibility for longitudinal analysis that enables to observe potential trends

and tendencies over time. On the other hand, since the secondary data is not

gathered to solve the specific problem at hand, it could mean that the

information is not sufficient to draw any new conclusions from. Further, the

data could be of a complex character that can result in that it takes time for

the researcher to become familiar with the information and how it is coded

(Bryman & Bell, 2011; Ghauri & Gronhaug, 2010).

Primary data is first-hand information collected with the intention to answer

to the specific research problem at hand. An advantage with primary data is

that it is information tailored-made to fit the specific purpose of the research.

Further, this type of information is advantageous since it is always up-to-date.

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Disadvantage with primary data is that it is costly and time consuming to

collect such information. There is also a risk of a low response rate when

gathering primary data since the quality of the outcome depends on another

party’s ability and desire to participate (Bryman & Bell, 2011).

Since the purpose of this study involves an industry were no specific

information about the subject at hand is available the study cannot emphasize

secondary sources of information to answer the purpose. A focus towards

primary data is thus inevitable in order to answer to the problem of this

specific research. In this study primary data sources will be used to answer

the specific research questions at hand.

4.4 Research Strategy Table 1. Research Strategies. Yin (2003)

Research Strategy

Form of Research Question

Requires Control Over Behavioral Events

Focuses on Contemporary Events

Experiment Survey Archival analysis History Case study

How why Who, what, where, how many, how much Who, what, where, how many, how much How, why How, why

Yes No No No No

Yes Yes Yes/no No Yes

There are a number of different research strategies available. What separates

these strategies is the formulation of the research question, the required

control the research has over behavioral events, as well as the time

perspective the study assumes (Yin, 2003).

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In this study the research strategy used is a survey. The justification for this

choice of strategy is based on that the research project requires a focus on

contemporary events and historical research strategy is thus not applicable for

this study. Further, archival analysis could be excluded since this type of

strategy focuses on secondary data already available from other sources of

information. Experiment was not viable since the researchers had no

opportunity to control the behavioral events of all respondents required to

accomplish an experiment. Further, this study will deal with a purpose that

answer to questions with the character of how much, which leads to that a

survey is the most suitable for this research project. Case study was not

suitable since questions of how much cannot be answered to with this type of

research strategy.

4.5 Data Collection Method

Within survey data collection there are a number of different approaches to

how data is collected and thereby how the survey is designed. A survey can

be formed as either a questionnaire or as a structured interview. A structured

interview is when the respondent completes the survey with the presence of

the researcher face-to-face or by telephone Ghauri & Gronhaug, 2010). The

advantage with an interview survey is that the researcher has the opportunity

to clarify any question marks that the respondent might experience.

Simultaneously, an interview survey also has disadvantages since the method

is very time consuming and more expensive to accomplish than a

questionnaire (Bryman & Bell, 2011; Ghauri & Gronhaug, 2010).

A questionnaire survey is when the respondent receives the research as a

document either by mail, digitally or in person from the researcher. The

advantage with these types of surveys is that the research can reach a wide

geographical area and a large amount of respondents in a cost and time

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efficient way. Further, questionnaire handed out in person typically have high

response rate since most people want to be perceived as helpful if they are

asked in person. The disadvantage with questionnaires is that this method can

have a low response rate if provided via e-mail or postal. Further, the

respondent must interpret the questions as the researcher intends and

misinterpretation or ambiguities cannot be sorted out since the researcher is

not present (Bryman & Bell, 2011).

In this study the survey design consists of a questionnaire provided digitally

to the respondents. These respondents are customer with an anonymous

company within the industry of Speciality Stores. This company will

henceforth be referred to as Company X.

Company X is an established retail chain in the Swedish home entertainment

industry. Company X is one of the largest establishments within this industry

with 97 stores nationwide and 154 employees in 2011. The stores consist of

both central-owned, franchise stores as well as an e-commerce alternative.

Company X´s vision is to be the largest nationwide entertainment retail chain

and their business idea is to attract customers with a wide range of high

quality home entertainment products that appeal to the whole family.

Company X’s turnover in 2011 was 346 million SEK. To study Company X

is suitable with a survey since the population is geographically spread and the

respondents can thus not be contacted face-to-face and a structured interview

research method is thus not applicable. In order to reach the respondents in an

efficient way the questionnaire will be provided digitally in order to save

both resources and time for the researchers.

Generalizability is according to Babbie (1995) the ability to apply the

research result conducted from a sample of a certain population to a broader

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population. This means that by studying a representative sample from a

population, for example a company, generalizability can be achieved for a

broader population such as an entire industry (Creswell, 2003; Yin, 2003)

Further, This type of generalizability is according to Yin (2003) called

statistical generalization and has been applied in this study. This was

implemented by studying a sample of Company X´s customers in order to be

able to draw generalizable conclusions about the industry of Speciality Stores

by applying the result of the sample to the entire population.

4.6 Data Collection Instrument

4.6.1 Operationalization and Measurement of Variables

According to Bryman & Bell (2011); Saunders, Lewis & Thornhill (2009) as

well as Ghauri & Gronhaug (2010) an operationalization is the process where

abstract theoretical concepts or a phenomenon are turned into measureable

items that can be measured and understood in a real world context. Bryman

& Bell (2011) mean that an extensive operationalization process is required

since a phenomenon or theoretical construct possesses no adequate real

measurability. According to Bryman & Bell (2011); Saunders, Lewis &

Thornhill (2009) as well as Ghauri & Gronhaug (2010) the operationalization

process means that these theoretical concepts are further divided into

variables that are decomposed into measureable items. Bryman & Bell

(2011); Saunders, Lewis & Thornhill (2009) as well as Ghauri & Gronhaug

(2010) mean that these constructed and decomposed measurable items can be

addressed as questions that ultimately represent the theoretical concept in a

study.

In order to measure the theoretical concepts (satisfaction, trust, commitment,

customer retention and word-of-mouth communication) in this study the

concepts had to be operationalized. These theoretical concepts were further

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decomposed into variables that represented these theoretical concepts.

However, due to the complex nature of relationships described by Babin,

Darden & Griffin, (1994); Fornell & Wernerfelt, (1987); Reichheld & Teal

(1996) as well as Vinson et al, (1977) who mention that different types of

consumers value different things in the relationship with a company, the

concepts had to be further decomposed. Due to this reasoning, this

decomposition was performed in order to ensure that the complexity and

different viable influences of relationships were measured in the study. This

is also supported by Morgan & Hunt (1994) who stress issues related to

relationship measures. With this second decomposition the study reached

theoretical substantiated indicators that represented the variables.

Bryman & Bell (2011) mean that indicators themselves cannot be measured

and therefore need to be coded in order to be quantifiable. This can be

achieved through a Likert scale measure. A Likert scale measurement is

according to Bryman & Bell (2011) as well as Saunders, Lewis & Thornhill

(2009) a way to measure an indicator by coding the indicator for the

respondent. The indicator can be coded from either 1-7 or from 1-5 where 1

represents “strongly disagree” and the highest score represent “strongly

agree” (Bryman & Bell 2011; Saunders, Lewis & Thornhill 2009). With a

Likert scale the indicator is quantifiable and the result can thus be measured

and compared.

The use of available measurements such as a Likert scale measure is a

recognized method to reach appropriate measures (Bryman & Bell 2011;

Saunders, Lewis & Thornhill 2009). This will provide the study with more

adequate measures when it comes the quality of the measures (Bryman &

Bell 2011). Antecedents’ measures of satisfaction, trust, commitment,

customer retention and word-of-mouth communication have been reviewed

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through the theoretical background in this study. All adequate instrumental

measure is originated from the literature. However, these indicators have

been reformulated to suit the specific purpose of this study. For a complete

operationalization table including measurable items see attachment 1 and to

see an overview of questions developed specifically for this study see

attachment 2.

Bryman & Bell (2011) as well as Ghauri & Gronhaug (2010) states that a

measurement can be achieved with either a single or multiple indicator

measurement. However, a single indicator may capture only a portion of the

underlying concept if the respondents misinterpret the single question that

can offset its effects. Simultaneously, multiple indicators cover a wider range

and at the same time ensure that concepts are investigated since a

misinterpreted question is covered by another. Most importantly, the internal

validity of the study is strengthened by multiple indicators (Bryman & Bell

2011; Ghauri & Gronhaug 2010).

The indicators in this study are derived from the literature review. However,

within the construct of commitment the measureable items continuity costs,

search costs, setup and sunk costs were excluded when the operationalization

process was performed since these items measure external factors beyond

Company X´s control to have an impact on and are thus not relevant to

investigate in this study. Further, solidarity and cohesion within the construct

of commitment was also discarded since these items did not fall within the

level of significance when a correlation analysis was performed.

Simultaneously, the items confidence, violation of promises and friendship

was also excluded due to that they did not fall within the level of

significance. Tailored offers within commitment were also excluded since the

pretest performed indicated that the respondents became confused when these

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questions were asked since tailored offers were not encountered in their

relationship with Company X. Finally, the item convenience was excluded

from the construct of satisfaction since the correlation analysis indicated that

this item measured essentially the same thing as the item accessibility

included within the same construct.

Table 2 present the steps performed in the operationalization process and

display the theoretical concepts, constructs, variables and indicators that are

emphasized in this study. This table is a simplified version of the

operationalization performed in this study. To review the complete

operationalization performed in this study see attachment 1.

Table 2. Simplified Operationalization Table

Relationship Quality Relationship Outcome Satisfaction Service quality Accuracy, reliability, empathy, responsiveness Service features Customer surprise, accessibility Customer complaint management Complaint management

Trust Shared values Identification, internalization Communication Frequency, quality, reliability Opportunistic behavior Benevolence

Commitment Relationship benefits Promises, customer privacy, familiarity, economic advantages, product advantages, Switching costs Contractual costs, learning costs Scarcity of alternatives Limited edition products, exclusive products

Loyalty Customer retention Number of purchases, extent of purchases Word-of-mouth communication Direct recommendation, sharing of thoughts

4.6.2 Questionnaire Design

The questionnaire in this study was conducted digitally, which mean that the

respondents answered the questionnaire from their own computer. The

questionnaire was distributed through e-mail with Company X as the sender.

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In this e-mail the respondents were asked to fill out the questionnaire and

were informed that their contribution was anonymous and of great

importance for the company’s ability to improve the offer provided by them.

In exchange for participating the respondents were granted a reward from

Company X in form of a discount offer. Bryman & Bell (2011) mention that

it is important to give respondents something in exchange when participating

in research in order to increase the response rate. Although the questionnaire

was intended to gather information for purposes of this study it was important

that the respondent got the feeling that Company X was conducting the

survey. This was important in order to maintain credibility with the

respondent and to further increase the response rate.

The questions were extracted from the operationalization of the study and

were each related to the different concepts of the study. The questions were

formulated as statements that the respondent had to consider from his

perspective and further grade on a provided Likert scale from one to seven

where one was referred to as “strongly disagree” and number seven where

referred to as “strongly agree”. According to Bryman & Bell (2011) a Likert

scale is a scale commonly involved in research and is often used in

questionnaires. Further, the advantage with this scale is that the questions are

equally weighted and pre-coded, which means that the analysis of the

answers are simplified due to the coding of the material. It is of great

importance that the questionnaire has a clear and understandable design of

how and why the respondent should complete the questionnaire. A short

introduction section can be added to clarify how the respondent should reply.

In this study an introductory text was created and included in the

questionnaire to achieve these described objectives. The respondents that

answered the survey have Swedish as their mother tongue. Due to this, their

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skills in the English language could not be determined and to ensure that all

of the respondents understand the questions asked properly, a translation to a

Swedish version of the questionnaire was made. After the translation was

made, a third person with significant knowledge in the specific theoretical

field was asked to back translate the Swedish version so that the researcher

could ensure that the questions was translated and understood correctly. For

the Swedish version of the questionnaire see attachment 3 and the English

version attachment 4.

4.6.3 Pretesting

The objective to pursue when performing a pretest is to in an early stage

identify potential factors that in turn can be improved which finally will lead

to a more reliable study. A pretest can be performed by letting an expert with

theoretical knowledge about the specific concepts judge and give suggestions

of improvements. A pretest can also be conducted by using a selection of

respondents derived to the target group of the study in order to examine how

well the survey is understood. (Bryman & Bell, 2011)

In this study a pretest was conducted by letting an expert within the specific

area review the survey to determine if the questions were properly stated.

Further, a pretest was also conducted where 80 respondents from Company

X´s customer database was included. These respondents were given the

opportunity to complete the survey as well as give feedback about the

questions and structure. This feedback was than taken into account when

developing the final version of the survey. Further, these respondents were

excluded from the main data collection sample. As many as 80 respondents

could be used in the pretest due to the privilege of having access to Company

X´s database where up to 250 000 customer are registered.

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4.7 Sampling

According to Bryman & Bell (2011) a population can be explained as the

entities within a specific group or/and in the same geographical area. The

population in this study consists of people that are members of Company X.

In order to become a member of the company the customer has at some point

in time sought the company and the customer information has at this point

been registered in the company database. This customer database consists of

approximately 250 000 members that are both male and females, represented

in the ages from 12 years and above spread across the geographical area of

Sweden.

According to Bryman & Bell (2011) there are typically two types of surveys,

including census surveys that study every element of a population and sample

surveys that study a share of a population to be able to draw generalizable

conclusions about the whole. There are distinct advantages of sample survey

methods in contrast to census survey methods in the way that it saves time

and money for the researcher when it comes to conducting the survey.

The survey method applied in this study is a sample survey since the

population studied is extensive and distributed across the geographical area

of Sweden. It is thereby not feasible to study the population with a census

approach and a sample survey method is thus preferable.

4.7.1 Sampling Frame

The first step in a sample survey method is to define the population under

investigation. The second step is to identify the sampling frame of the

population, which involves determining components of interest from which

the sample is decided. The last step in the process is to decide the size of the

sample to ensure that the entire population is represented in the sample. There

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are a number of ways to accomplish this, including studying previous similar

research and their sample sizes, determine the sample size based on available

resources in form of time and money, and finally using available statistical

methods to determine the sample size (Bryman & Bell, 2011).

In this study a statistical method is used to determine the sample to ensure

that the size of the sample is representable for the whole population.

According to Bryman & Bell (2011) the level of confidence should be 95

percent or higher to ensure that the errors caused by only studying a sample

of the population is not significant so that it affects the accuracy. The sample

frame in this study was selected randomly from the customer database of

Company X. The respondents were further contacted through the e-mail

address that they specified when became a member at the company. A total

number of 2 000 respondents were contacted and was given the opportunity

to participate in the survey.

4.7.2 Sample Selection

In this study a statistical method will be used to find the appropriate sample

size of the study. The sample size is calculated statistically and the equation

finds the required sample size of the study based on the population size while

also taking the number of standard errors into account. By using this method

the researcher can ensure that the sample he investigates statistically

represents the whole population under investigation (Bryman & Bell, 2011). Figure 2. Sample Size Statistical Formula. Malhotra (2011)

! = 2!500!×!N!×!Z!25! N − 1 + [2!500!×!!Z!]!

! = Sample!size!required!!N = Population!size!!Z = Number!of!standard!errors!!!!!!!!!!(1.96!for!95%!confidence!level)

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In this study the sample size required to achieve statistical significance has

been determined to 384 respondents, displayed with the following

calculation:

! = !!!""!×!!"#!!!!!×!!.!"!!"! !"#!!!!!! ![!!!""!×!!!.!"!]! = 383.6

4.8 Data Analysis Method

Since this study is using a quantitative research approach, the analytical

approach is thus based on statistical analytical methods. The actual methods

used in this study are descriptive statistics, correlation analysis, and

regression analysis. All data analysis is performed with the statistical

analysis software SPSS.

4.8.1 Descriptive Statistics

According to Bryman & Bell (2011); Saunders, Lewis & Thornhill (2009) as

well as Ghauri & Gronhaug (2010) descriptive statistics is a method that

involves quantitatively describing the collected information about a sample of

a population by summarizing and presenting the data. Descriptive statistics

should be seen as the basis for presenting quantitative data in a clear and

understandable way and is thus used in this study to initially present and

describe the collected data. According to Bryman & Bell (2011); Saunders,

Lewis & Thornhill (2009) as well as Ghauri & Gronhaug (2010) descriptive

statistics can be presented through tables, diagrams and charts where the

median, mode and mean can display the central tendency in the material

gathered. The median presents the middle value in the distribution when the

data has been organized ascending. With the median value calculation

outliers in the distribution can be identified and sorted out. With a mean

calculation the average value in the whole distribution can be visualized.

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With the mode value calculation the most frequent value can be identified.

This calculation can be valuable if one value in the distribution is very

overrepresented making a median calculation misleading (Bryman & Bell,

2011; Saunders, Lewis & Thornhill, 2009; Ghauri & Gronhaug, 2010)

In this study the calculation of median will be emphasized to find the central

tendency of the gathered material. This is implemented due to the ordinal

nature of the measures where a Likert scale is emphasized. Bryman & Bell

(2011) mentions that median is the best way to find the central tendency in

ordinal level measures.

4.8.2 Correlation Analysis

Correlation analysis is according to Bryman & Bell (2011); Saunders, Lewis

& Thornhill (2009) as well as Ghauri & Gronhaug (2010) a method that

evaluate the strength of the relationship between variables, which more

concretely describes to what degree a change of one variable influence a

change in another. This can be addressed by calculating the correlation

coefficient between the variables. This coefficient can vary between -1 to 1

where -1 means that two variables are perfectly inversely related to each

other. Simultaneously, 1 means that two variables are perfectly related to

each other meaning that if one variable value changes by one the other

variable changes equally. If the coefficient between the variables is 0 or close

to 0 this means that the variables have no relation to each other. Further, it is

of importance that the independent variables in a study are not to closely

related to each other since this mean that they measure similar outcomes with

the respondent (Bryman & Bell, 2011; Saunders, Lewis & Thornhill, 2009;

Ghauri & Gronhaug, 2010). In this study a calculation of correlation between

the variables in the study has been performed in order to determine the

relationship between the variables.

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4.8.3 Regression Analysis

According to Bryman & Bell (2011); Saunders, Lewis & Thornhill (2009) as

well as Ghauri & Gronhaug (2010) regression analysis is a method that

assesses the explanation between an independents and dependent variable.

The method can thus determine to what extent an independent variable

explains the value of a dependent variable.

Cohen et al. (2003) mentions that multiple regression analysis is a stronger

method than a single regression analysis since the researcher can address how

a dependent variable is explained by multiple independent variables. Cohen

et al. (2003) states that this analysis is assessed by investigating the R2 that

present how the variance of a dependent variable can be explained by the

investigated independent variables.

In this study a multiple regression analysis is implemented to due to the

advantages mentioned by Cohen et al. (2003). It is also performed since

multiple independent variables exist in relation to each construct. With this

approach the study can find how decomposed variables represent the

constructs of the study and in particular how these constructs (satisfaction,

trust and commitment) answers to the outcome of relationships (customer

retention and word-of mouth-communication).

4.9 Quality Criteria

4.9.1 Validity

According to Bryman & Bell (2011) validity refers to if measures of a

concept in a study actually measure that intended concept. Validity is an issue

that should be stressed in every particular study since different types of study

approaches applied requires that validity is addressed in different ways. Due

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to the quantitative research approach of this study three types of validity is

taken into account. These are content, construct and criterion validity.

4.9.2 Content Validity

According to Bryman and Bell (2011) as well as Saunders, Lewis &

Thornhill (2009) it is of great importance to ensure that the questions asked to

the respondents actually measures what the question is intended to measure.

Further, Bryman and Bell (2011) as well as Saunders, Lewis & Thornhill

(2009) mentions that the questions should appear easy to answer and be

understandable for the respondents. This is addressed as content validity.

Content validity can be achieved by letting experts review and judge the

questions before the gathering of data. Bryman and Bell (2011) as well as

Saunders, Lewis & Thornhill (2009) mentions that a preview by experts

strengthens the content validity in the study.

Content validity can according to Bryman and Bell (2011) as well Saunders,

Lewis & Thornhill (2009) further be addressed by pretesting the

questionnaire with help from prospective respondents that is included in the

calculated sample. Bryman and Bell (2011) as well as Saunders, Lewis &

Thornhill (2009) mean that pretesting can determine whether questions

appear understandable or if the questionnaire are too extensive. The

knowledge gained from a pretest are very valuable for the actual gathering of

data since it gives the opportunity to correct any potential errors while

simultaneously improving the questionnaire with help from the pretest. In this

study content validity was achieved by allowing a person with approved

knowledge about the theoretical framework review the survey questionnaire

and by this ensure that the questions appear understandable and related to the

theory. Further, content validity in this study was also realized by distributing

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the questionnaire to respondents derived from this study´s target group that in

turn gave feedback both regarding the formulation of questions and structure.

4.9.3 Construct Validity

Construct validity is according to Bryman and Bell (2011) as well as

Saunders, Lewis & Thornhill (2009) whether the measures in a study actually

address and measure the specific concepts that it is intended to measure or

not. In this study construct validity was addressed with convergence and

discriminate validity.

Convergence validity is according to Bryman and Bell (2011) as well as

Saunders, Lewis & Thornhill (2009) to what extent measures in a study

converge with other measures of the same construct. Bryman and Bell (2011)

as well as Saunders, Lewis & Thornhill (2009) mean that convergence

validity can be indicated as strong correlations between the independent

variables and dependent under the same constructs. In this study,

convergence validity has been addressed by stressing the correlation between

independent variables within theoretical constructs in relation to each other.

A strong positive correlation indicated convergence validity between the

theoretical constructs and the different independent variables within that

construct.

Discriminant validity is according to Miles & Huberman (1994) the

correlation between the different measures or theoretical concepts in a study.

Miles & Huberman (1994) mean that discriminant validity is achieved when

the different concepts or dependent variables are unrelated when they are

suppose to be unrelated. In other words, Miles & Huberman (1994) state that

the dependent variables should have low or no correlation between each other

in order to reach construct validity in the study. In this study the correlation

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between the dependent variables stressed to ensure construct validity. It was

of great importance that the correlation coefficient between the variables

representing different theories in the study was non-existing or low in order

to ensure construct validity. This was important since these variables were

intended to measure different theoretical concepts and a correlation should

thus not exist.

4.9.4 Criterion Validity

Criterion validity refers to the extent to which the operationalization can

predict constructs in relation to other variables (Bryman & Bell, 2011).

Criterion validity can be divided into two different types of validities that is

concurrent and predictive validity (Bryman & Bell, 2011).

Concurrent validity is obtained by compare the test at hand with an existing

similar test with measures that already have been validated. The validated

measures do not have to be exactly the same constructs as the measures at

hand, only related to each other. Further, by using similar measures as used in

the validated tests the researcher can thus achieve concurrent validity in the

test at hand (Bryman & Bell, 2011; Ghauri & Gronhaug, 2010). In this study,

concurrent validity has been achieved by using measurable items validated in

previous research when formulating the survey questions.

Predictive validity is of similar character that concurrent validity, but with

one main difference. The time aspect separates the predictive validity from

the concurrent in the way that the researcher uses a future criterion measure

instead of a contemporary measure that is used to obtain concurrent validity

(Bryman & Bell, 2011). In order to obtain predictive validity an

operationalization of theoretical concepts is used to predict a future outcome

(Ghauri & Gronhaug, 2010). In this study, predictive validity has been

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achieved by collecting theoretical insight that further has been

operationalized in order to state hypotheses, which later can be tested by

implementing a survey and analyzing the result.

4.9.5 Reliability

Reliability is according to Bryman & Bell (2011); Saunders, Lewis &

Thornhill (2009) as well as Ghauri & Gronhaug (2010) how consistent a

measure of a concept is. Reliability can according to Bryman & Bell (2011)

be addressed by assessing the stability, the internal reliability and inter-

observer consistency.

The stability aspect of reliability is according to Bryman & Bell (2011) how

stable a measurement is over time. In other words, stability occurs when there

is little variation in the results that measure a specific construct at different

points in time. Stability can be addressed by asking the questionnaire

questions at another point in time to find if there variances exists between the

results of the studies. In this study stability as described by Bryman & Bell

(2011) could not be performed due to the time restrains and limitation in

resources.

Internal reliability describes the degree to which a measure is consistent

within itself, i.e. how well the different measurable items within an

operationalized concept correlate with each other (Bryman & Bell, 2011).

According to Ghauri & Gronhaug (2010) internal reliability is established by

calculating the Cronbach´s alpha coefficient, which can vary from perfect

internal reliability (indicated as 1) to no internal reliability (indicated as 0).

Different authors accept different values of Cronbach´s alpha in order to

achieve internal reliability, but the most frequent accepted value is .70 as it

should be equal to or higher than to reach internal reliability (Hair et al.

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2003). In this study, a Cronbach´s alpha value of at least .80 was accepted in

order to obtain internal reliability.

According to Bryman & Bell (2011) inter-observer consistency refers to

subjective perspectives that can influence the result of an observed measure.

This means that whenever human interpretation is a part of the measurement

procedure, the researcher must be aware of that the reliability can be

questioned. In this study, no observation has been made and interpretations of

subjective nature have been evaluated in symbiosis between the authors of

this study.

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Chapter 5. Data Analysis

5.1 Descriptive Statistics

The data collected in this study was gathered through Company X´s customer

database. A total number of 2 000 surveys was distributed digitally to

randomly selected customers in the database. The survey generated 434

responses resulting in a response rate of 21.7 percent. The survey required

that the respondent gave a response in relation to every question in order to

complete and submit their response. This resulted in that no incomplete

surveys were gathered.

248 or 57.2 percent of the respondents were female. Males were represented

by 186 or 42.8 percent of the respondents. Further, most of the respondents

could be found between the ages of 26 to 49 years old. This age group

represented 57.1 percent or 248 individuals. 138 respondents or 31.8 percent

could be found in the age bellow 25. The final age group was respondents

over 50 years of age, which represented 48 individuals or 11.1 percent of the

respondents.

Table 3. Demographics

Frequency Percent (%) Gender Female Male Total: Age <= 25 26-49 >= 50

248 186 434 138 248 48

57.2 42.8 100.0 31.8 57.1 11.1

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The variables in this study were measured with a seven points Likert scale.

The averages of these concepts are presented in table 4 with a measure of

standard deviation. The highest mean was found in word-of-mouth with 5.24

while commitment had the lowest mean with 3.81.

Table 4. Mean & Standard Deviation of Variables

Variable Mean Std. Deviation Retention Word-of-Mouth Satisfaction Trust Commitment

4.88 5.24 5.03 4.43 3.81

2.40 1.39 1.25 1.28 1.38

5.2 Reliability

The reliability was addressed with a test of the Cronbach’s alpha related to

each of the variables under each construct. The Cronbach’s alpha should be

over 0.70 (Hair et al. 2003) for the variables under each construct to allow a

merger into a single representative variable. The reliability for satisfaction

was 0.905 through seven variables, Trust was 0.892 through six variables,

commitment was 0.875 through nine variables, word-of-mouth was 0.806

through two variables and finally the reliability of the variable retention could

not be addressed since this value was only dependent on one measure.

Table 5. Reliability Test

Variable Cronbach’s Alpha Number of Items Retention Word-of-Mouth Satisfaction Trust Commitment Total:

- 0.806 0.905 0.892 0.875

1 2 7 6 9 25

!

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5.3 Correlation Analysis

When addressing the correlations between the concepts, a level of correlation

less than 0.90 could be demonstrated between the variables. A significance

level of 0.01 was found in all correlations except from retention to

satisfaction, trust and commitment. In these correlations the level of

significance accepted in this study was not achieved and the correlation could

not be determined.

Table 6. Correlation Analysis

Variable 1 2 3 4 5 1. Satisfaction Sig. 2. Trust Sig. 3. Commitment Sig. 4. Word-of-Mouth Sig. 5. Retention Sig.

1 0.844** 0.000 0.767** 0.000 0.725** 0.000 0.081 0.237

1 0.775** 0.000 0.707** 0.000 0.121 0.075

1

0.602** 0.000 -0.069 0.312

1 0.240** 0.000

1

N = 434 ** = Correlation is significant at the .01 level !5.4 Hypothesis Testing

The regression analysis in this study was conducted in relation to two

different dependent variables. First, word-of-mouth was addressed resulting

in an adjusted R2 of 0.551. This gives the independent variables in this model

being satisfaction and trusts a prediction rate of 55.1 percent on the

dependent variable of word-of-mouth. The B-value for each independent

variable shows a positive impact on the dependent variable. Satisfaction has a

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positive impact of 0.491, trust has a positive impact of 0.356 and finally

commitment demonstrates a positive impact of 0.011. When addressing the

p-value of these regressions both satisfaction and trust was significant.

However, the p-value of commitment does not apply in the accepted level of

significance. This resulted in that H6 was not supported. Simultaneously, the

H2 and H4 were supported since these hypotheses were within the margin of

significance level.

Table 7. Regression Analysis

N = 434 R2 = 0.557 Adjusted R2 = 0.551 F-statistic = 89.191

Secondly, retention as a dependent variable was addressed in the same way as

word-of-mouth. This resulted in a model with an adjusted R2 of 0.072, which

means that this model fit was low and thus discarded. In the model the

independent variables could predict the outcome of retention to a power of

7.2 percent. This leads to that the hypothesis H1, H3, H5 are not supported.

A: Dependent Variable: Word-of-Mouth Independent Variable B p-value Conclusion Satisfaction Trust Commitment

0.491 0.356 0.011

0.000 0.000 0.890

H2 supported H4 supported

H6 not supported

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Chapter 6. Discussion, Conclusion & Implications

6.1 Discussion

The purpose of this thesis was to explain how satisfaction, trust and

commitment impacts customer retention and word-of-mouth communication

within the industry of Speciality Stores. Two suggested outcomes of

customer relationships were conceptualized through the available literature.

Customer retention function as one of the two outcome parts of the

relationship and word-of-mouth communication as the other. These outcomes

functioned as dependent variables in two different models that were tested in

relation to the independent variables of relationship quality. Regarding

customer retention, this model could not be supported since an accepted level

of significance was not achieved and a value of 0.072 for the adjusted R2

indicated a low model fit. The low model fit resulted in that this model was

discarded since no conclusions could be drawn. Accordingly, the hypotheses

H1, H3, H5 were thus not supported.

The model with word-of-mouth communication as dependent variable

achieved an adjusted R2 of 0.551. In this model, the two hypotheses regarding

satisfaction and trust (H2, H4) achieved an accepted level of significance

while the commitment hypothesis (H6) did not fall within the accepted level

of significance which resulted in that H6 could not be supported.

Simultaneously, the hypotheses H2 (satisfaction has a positive impact on

word-of-mouth communication) and H4 (trust has a positive impact on word-

of-mouth communication) could due to their accepted level of significance

therefore be supported. The B-values of these independent variables were

0.491 for satisfaction and 0.356 for trust, which indicated a variance in how

they individually influence the dependent variable of word-of-mouth

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communication. It can thereby be stated that satisfaction has a greater impact

on word-of-mouth communication than trust.

The supported impact that satisfaction has on word-of-mouth communication

found in this study can also be supported in the available literature (Ladhari,

2007; Ranaweera & Prabhu, 2003; Kim, Ng & Kim, 2009; Bitner, 1990;

Oliver, 1980; Bloch, 1986; Reichheld & Sasser, 1990). This means that if

companies within the industry of Specialty Stores are able to satisfy

customers, these customers will communicate valuable word-of-mouth

communication about that company. In this way, word-of-mouth can be

achieved through high quality in both the physical offerings as well as in the

core service (Fornell et al., 1996).

Further, this study also support that trust has a positive impact on word-of-

mouth communication, which also is determined by Ranaweera & Prabhu

(2003). However, few studies have according to Ranaweera & Prabhu (2003)

investigated the relationship between trust and word-of-mouth

communication before. The supported relationship from this study stresses

the importance of trust in achieving word-of-mouth communication in the

industry of Specialty Stores. Specifically in this study, it has been

demonstrated that companies within the industry of Specialty Stores could

achieve word-of-mouth communication by reaching satisfaction and trust

among its customers. Further, this study has also demonstrated that

satisfaction to a greater extent leads to word-of-mouth communication than

trust in the industry of Specialty Stores. This indicates that the features of

satisfaction that are mentioned by Hensemark & Albinsson (2004) to be

service quality, service features and customer complaint management

represents the most important requirements, in relation to the features of trust,

that companies within the industry of Specialty Stores must consider in order

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to achieve word-of-mouth communication among its customers. The features

of trust is mentioned by Morgan & Hunt (1994) to be shared values,

communication and opportunistic behavior that according to this study all

contributes to that customers spread word-of-mouth communication about a

company, but to a lower degree than satisfaction.

With an adjusted R2 of 0.551 it can be determined that satisfaction and trust

can explain word-of-mouth communication to 55.1 percent. Further, this also

indicates that word-of-mouth communication is explained to 44.9 percent by

other unknown factors than the independent variables of satisfaction and

trust. In recent years, service recovery has been described as a possible

antecedent of word-of-mouth communication (Buttle, 2011; Swanson &

Kelly, 2001). Swanson & Kelly (2001) mention that service recovery is the

actions that a company performs to address a failed service. What is

described is that if a company´s service recovery action is successfully

performed, the customer might be more willing to spread word-of-mouth

communication about that company. With regard to service recovery, the

remaining unexplained 44.9 percent of word-of-mouth might be attributed to

some extent by this theory. If service recovery was included in the conceptual

model the coefficient of determination could possibly be expanded.

The impact of commitment on word-of-mouth could not be supported in this

study. This may be due to that commitment consists of several dimensions,

which are not all examined in this study. Because of this, it is uncertain how

commitment affects word-of-mouth communication for the industry of

Specialty Stores. Further, the result of this study could either support

Fullerton (2003) who mentions that commitment can have a negative effect

on word-of-mouth or Dick & Basu (1994) as well as Harrison-Walker (2001)

who describe a positive relation between these concepts.

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6.2 Conclusion

I. The model treating customer retention did not achieve significance,

which indicated a low model fit. This resulted in that the hypotheses

H1, H3 and H5 were not supported in this study.

II. The hypotheses treating word-of-mouth H2 and H4 were supported due

to their accepted level of significance while H6 did not fall within the

accepted level of significance and was thus not supported in this study.

III. Within the industry of Speciality Stores, satisfaction and trust can

together explain word-of-mouth communication with a 55.1 percent

certainty. The remaining 44.9 percent cannot be explained in this study

since it is dependent on unknown factors.

IV. The features of satisfaction (service quality, service features and

customer complaint management) are the most important of the treated

features for companies to enact within the industry of Specialty Stores

if customers to companies within this industry should express word-of-

mouth communication about that company.

V. The features of trust (shared values, communication, opportunistic

behavior) have also demonstrated to have an impact on the customer’s

willingness to spread word-of-mouth communication. However,

satisfaction has according to this study a greater coefficient of

determination than trust regarding word-of-mouth communication.

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6.3 Academic Implications

Previous studies have demonstrated that satisfaction influences word-of-

mouth communication (Ladhari, 2007; Ranaweera & Prabhu, 2003, Kim, Ng

& Kim, 2009; Bitner, 1990; Oliver, 1980; Bloch, 1986; Reichheld & Sasser,

1990). The results found in this study supports the reasoning that these

authors mention. A contribution has further been made by this study in the

sense that the unknown influence between satisfaction and word-of-mouth

communication within the industry of Speciality Stores is hereby confirmed.

The influence that trust has on word-of-mouth communication described by

Ranaweera & Prabhu (2003) has also been supported with this study.

However, few studies have according to Ranaweera & Prabhu (2003)

investigated this influence. This study contributes by demonstrating that the

influence described by Ranaweera & Prabhu (2003) also is applicable in the

industry of Speciality Stores. Further, Ranaweera & Prabhu (2003) mention

that trust is just as important as satisfaction in achieving word-of-mouth

communication. This reasoning could not be supported since the influence of

satisfaction has according to this study been demonstrated to have a greater

impact on word-of-mouth communication than trust.

6.4 Managerial Implications

This study has supported that customer satisfaction and trust leads to word-

of-mouth communication within the industry of Speciality Stores. Further,

satisfaction has shown to have a stronger impact on word-of-mouth than

trust.

For managers it is therefore important to consider the different features of

satisfaction and trust in order to get customers to spread word-of-mouth about

the company. With regard to satisfaction it is important that the company´s

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representatives proclaims that they cares about the customers in order to

convey reliability and accuracy. Further, it is also import for mangers to

consider the accessibility of their offer. This means that satisfaction can be

achieved by extending opening hours that exceeds the customers

predetermined expectations. Finally, it is import for mangers to be responsive

to customers’ opinions in order to achieve satisfaction. This can be

accomplished by advocating customer complaint management about the

company.

With regard to trust it is important that customers can identify themselves

with the company in order to achieve trust. With this in mind it is important

for managers at companies with this industry to know their target audience in

order to understand what is important for these customers. With this

knowledge the company can create an emotion among its customers that the

company match whom the customer is. For the sales representatives it is

important to demonstrate competence and credibility in order to create trust

both for the company as a whole and also for the sales representative as an

individual. Finally, trust can be achieved if the customer experiences that the

company is willing or has sacrificed something extra or unexpected in order

to maintain the relationship with the customer.

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Chapter 7. Limitations & Future Research

7.1 Limitations

The findings of this study have been derived from the empirical information

gathered through Company X´s customer database. Since Company X is a

company within the industry of Speciality Stores this means that the result is

applicable for companies mainly within this specific industry. This type of

generalization were a sample of a population (in this study a sample of

Company X) is studied in order to draw general conclusions about a broader

population (in this study the industry of Speciality Stores) is supported by

Creswell (2003) as well as Yin (2003). Companies in other industries or

branches should interpret the result of this study carefully because the focus

throughout the entire study has been on the specific industry of Speciality

Stores.

The low model fit of customer retention lead to that the hypotheses treating

customer retention were not supported. This is a limitation of the study since

one part of the relationship outcome was thus discarded and conclusions in

relation to customer retention could therefore not be stated. The authors of

this study believe that the low model fit can be a result of that customers from

a specific company were emphasized for the empirical investigation. This

could have had an impact on the result in sense that some customers despite

dissatisfaction with the company choose to return to the company because of

unknown factors. This speculation is derived from a manual overview of the

empirical material were several respondents demonstrated contradictory

answers in relation to the study´s stated hypotheses. For instance, several

respondents showed a high retention rate to the company while

simultaneously being dissatisfied with the company. Further, the opposite

result was also observed in empirical material were very satisfied customers

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had a low retention rate. This ambiguity can potentially be explained by that

the company’s customers do not value the components of relationship that

this study has treated.

7.2 Future Research

The model treating customer retention did not achieve statistical significance

and was thus discarded. Still, customer retention remains an important factor

for businesses in all types of industries according to the literature. This is

supported by Rigby, Reichheld & Dawson (2003) who mention that such a

small increase as five percent in customer retention could result in an

increase of up to 95 percent in profits for the company. Since the model

including retention developed in this study did not achieve statistical

significance it is suggested that future research stresses the issue of customer

retention within the industry of Speciality Stores. Due to that the conceptual

model treating customer retention developed in this study did not achieve

statistical significance we believe that it is important for future research to

initially adopt an exploratory research design to gain a deeper understanding

about the antecedents of customer retention within the industry of Speciality

Stores. With new valuable knowledge about customer retention derived from

exploratory research the phenomena can further be explored from a new

perspective.

That word-of-mouth communication can be derived from the company’s

achievement of satisfaction and trust has been supported in this study. These

results are derived from the supported hypotheses and the antecedents of

word-of-mouth communication could be tested on several companies in

different industries by emphasizing the supported hypothesis developed in

this study. The literature also suggests that service recovery could be a part of

what triggers word-of-mouth communication. With this in mind, it would be

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of interest for future research to include service recovery as an independent

variable to investigate how this affects the result and the turnout of word-of-

mouth communication.

Finally, this study has been performed specifically on the industry of

Speciality Stores. Future studies concerning other industries within retailing

could provide the opportunity to compare how the developed conceptual

framework in this study performs in different retail contexts. By extending

the field of study we as authors believe that the conclusions drawn in this

study could be further strengthen.

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Attachments Attachment 1. Operationalization Table

Phenomenon Construct Variable Measurable Item Reference Measurement Relationship Quality Satisfaction Service quality Accuracy Parasuraman, Berry & Zeithaml (1991) Seven point Likert scale

1 = Strongly disagree 7 = Strongly agree

Reliability Parasuraman, Berry & Zeithaml (1991) Empathy Parasuraman, Berry & Zeithaml (1991) Confidence Parasuraman, Berry & Zeithaml (1991) Responsiveness Parasuraman, Berry & Zeithaml (1991) Service features Customer surprise Pine & Gilmore (1999) Accessibility Lavesque & McDougall (1996) Customer complaint

management Complaint management Johnston (2001); Nyer (2000)

Trust Shared Values Identification Morgan & Hunt (1994) Seven point Likert scale 1 = Strongly disagree 7 = Strongly agree

Internalization Morgan & Hunt (1994) Communication Frequency Morgan & Hunt (1994) Quality Morgan & Hunt (1994) Reliability Morgan & Hunt (1994) Opportunistic behavior Benevolence Rempel, Holmes & Zanna (1985) Commitment Relationship benefits Promises Gwinner et al. (1998) Seven point Likert scale

1 = Strongly disagree 7 = Strongly agree

Customer privacy Gwinner et al. (1998) Familiarity Gwinner et al. (1998) Economic advantages Gwinner et al. (1998) Product advantages Gwinner et al. (1998) Switching costs Contractual costs Guiltinan (1989) Learning costs Heskett (1990) Scarcity of alternatives Limited edition products Gierl & Huettl (2010) Exclusive products Gierl & Huettl (2010) Relationship Outcome Loyalty Customer retention Number of purchases Verehof (2003) Ratio Scale

Extent of purchases Bowman & Narayandas (2001); De Wulf et al. (2001)

Word-of-mouth

communication Direct recommendations Fullerton & Taylor (2002) Seven point Likert scale

1 = Strongly disagree 7 = Strongly agree Sharing of thoughts Maru File, Cermak & Prince (2004)

83 (89)

Attachment 2. Framework of Survey Questions

Measurable item Question Accuracy Company X is accurate when providing services to me

Reliability The employees at Company X feels reliable

Empathy Company X demonstrate empathy

Confidence Company X does not demonstrate confidence

Responsiveness The service provider of Company X is responsive to me

Customer surprise Company X exceeds my expectations when delivering their offer

Accessibility Company X is accessible (geographic distribution of stores, opening hours, etc.)

Complaint management Company X is offering to receive complaints from me if I’m not satisfied

Identification I can identify with what Company X stands for

Internalization I adopt the values that Company X stands for

Frequency Company X sends frequent enough out information to me about news and offers

Quality The communication from Company X is of high quality

Reliability Company X is perceived as credible when they send information to me

Violation of promises Company X does not keep its promises

Benevolence Company X is willing to sacrifice something extra to please me

Customer privacy Company X protect my privacy

Familiarity Company X convey an emotion of familiarity

Friendship Company X does not feel like a friend of mine

Economic advantages Company X offer me lower prices

Product advantages Company X offer me rewards in form of products

Contractual costs I would continue to buy from Company X even if they charged me for my membership

Learning costs I can become a member of Company X without any extra efforts

Limited edition products Company X offers products that are limited in time and/or edition (e.g. special edition products)

Exclusive products Company X offers exclusive products

Direct recommendation I gladly recommend Company X and their services to others

Sharing of thoughts I am happy to tell others what I know about Company X

Extent of purchases How many times do you rent or buy movies or games per year? (Estimate)

Number of purchases How many times do you rent or buy movies or games per year from Company X? (Estimate)

84 (89)

Attachment 3. Survey Design (Swedish Version)

85 (89)

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86 (89)

!

87 (89)

Attachment 4. Survey Design (English Version)

88 (89)

89 (89)

Linnaeus University – a firm focus on quality and competence On 1 January 2010 Växjö University and the University of Kalmar merged to form Linnaeus University. This new university is the product of a will to improve the quality, enhance the appeal and boost the development potential of teaching and research, at the same time as it plays a prominent role in working closely together with local society. Linnaeus University offers an attractive knowledge environment characterised by high quality and a competitive portfolio of skills. Linnaeus University is a modern, international university with the emphasis on the desire for knowledge, creative thinking and practical innovations. For us, the focus is on proximity to our students, but also on the world around us and the future ahead. Linnæus University SE-391 82 Kalmar/SE-351 95 Växjö Telephone +46 772-28 80 00