Personal Characteristics as Moderators of the Relationship Between Customer Satisfaction and Loyalty An Empirical Analysis

Christian Homburg and Annette Giering

ABSTRACT
Previous empirical research on the relationship between customer satisfaction and loyalty has largely neglected the issue of moderator variables. In a consumer-durables context the authors analyze the moderating effect of selected personal characteristics on the satisfaction loyalty link. The empirical ndings, which are based on multiple-group causal analysis, show that the strength of the relationship between customer satisfaction and loyalty is strongly inuenced by characteristics of the customer. Specically, variety seeking, age, and income are found to be important moderators of the satisfaction loyalty relationship. 2001 John Wiley & Sons, Inc.

In times of severe competition and rising customer expectations, rms are highly interested in keeping existing customers. As virtually all companies depend on repeat business, a strong interest in the antecedents of customer loyalty has evolved. Typically, customer satisfaction is thought of as an immediate antecedent to customer loyalty (E. W. Anderson & Sullivan, 1993, p. 125). In turn, customer loyalty should
Psychology & Marketing 2001 John Wiley & Sons, Inc.

Vol. 18(1):4366 (January 2001)

lead to increasing shareholder value and asset efciency (Reichheld, 1996a; Rust & Oliver, 1994). Thus, achieving high levels of customer satisfaction has become a major goal for many companies. The strong focus on customer satisfaction is based on the implicit assumption that there is a strong positive relationship between customer satisfaction and loyalty. Recently, however, the existence of this strong link has been questioned by managerial writers (Jones & Sasser, 1995; Reichheld, 1993, 1996b). Although these authors provide fragmented evidence for high defection rates of satised customers, this phenomenon remains largely unexplored in academic literature (Oliva, Oliver, & MacMillan, 1992). The objective of this study is to provide additional insight into the relationship between customer satisfaction and loyalty by examining the effects of moderating factors on this relationship. More specically, the link between satisfaction and loyalty in the context of consumer durables will be studied, and the impact of personal characteristics on this relationship will be investigated. Thus the study addresses the question: How do personal characteristics inuence the strength of the relationship between satisfaction and loyalty? The extant literature related to this issue is restricted to theoretical discussion (Dick & Basu, 1994) and very limited empirical evidence (Bloemer & Kasper, 1995; Kasper, 1988). Research of this type is also relevant from a managerial perspective. Managers responsible for customer retention programs need information concerning the determinants of customer loyalty. It is especially important for managers to know for which customers they can largely rely on satisfaction as a driver of loyalty. Furthermore, it is important to know which types of customers tend to be less loyal even though they may be highly satised. Previous research on customer satisfaction, customer loyalty, and the link between the two constructs will be reviewed, and a conceptual model specifying relationships between different dimensions of satisfaction and loyalty will be presented. Some possible moderator variables of those relationships are introduced. The research method and results are then described. The article concludes with a discussion of the ndings, an elaboration of the limitations of the ndings, and an exploration of the theoretical and managerial implications.

CUSTOMER SATISFACTION Early concepts of satisfaction research have typically dened satisfaction as a postchoice evaluative judgment concerning a specic purchase decision (Bearden & Teel, 1983; G. Churchill & Suprenant, 1982; Oliver, 1979, 1980; Oliver & DeSarbo, 1988). The theoretical model underlying the vast majority of early satisfaction studies is some version of the

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conrmation/disconrmation paradigm (e.g., Olshavsky & Miller, 1972; Oliver & Swan, 1989; Prakash, 1984). Recent literature adds to this perspective in two ways. First, although traditional models implicitly assume that customer satisfaction is essentially the result of cognitive processes, new conceptual developments suggest that affective processes may also contribute substantially to the explanation and prediction of customer satisfaction (Fornell & Wernerfelt, 1987; Oliver, 1997; Westbrook, 1987; Westbrook & Oliver, 1991). Second, authors have claimed that satisfaction should be viewed as a judgment based on the cumulative experience made with a certain product or service rather than a transaction-specic phenomenon (E. W. Anderson, Fornell, & Lehmann, 1994; Bayus, 1992; Wilton & Nicosia, 1986). Especially with regard to the relationship between customer satisfaction and loyalty, conceptualizing satisfaction as the outcome of one single transaction might be too restrictive: Dissatisfaction with a single transaction is unlikely to cause the customer to switch (Fornell, Johnson, Anderson, Cha, & Bryant, 1996). Also, a single transaction producing a state of satisfaction is unlikely to lead to long-term loyalty. Research in the growing eld of relationship marketing using the construct of customer satisfaction has also focused on a cumulative rather than a transaction-specic conceptualization (e.g., J. C. Anderson & Narus, 1990; Ganesan, 1994). There is general agreement that customer satisfaction should be conceptualized as a multidimensional construct (Yi, 1990). In this context, one of the frequently used dimensions is satisfaction with the product itself (LaBarbera & Mazursky, 1983; Marr & Crosby, 1992), which relates to the customers evaluation of product performance based on such characteristics as durability, dollar value, technical sophistication, and ease of use. Additionally, satisfaction with the sales process has received considerable attention in many studies (Marr & Crosby, 1992; Ramsey & Sohl, 1997). In this vein, a satisfaction judgment focuses on the interpersonal interaction between the sales personnel and the customer and the ability of the sales representative to meet a customers unique needs. Finally, satisfaction with the after-sale service is frequently conceptualized as a dimension of customer satisfaction. This dimension is commonly related to two fundamental properties (Ostrom & Iacobucci, 1995), including the customers judgment of the quality of the service and his evaluation of the interaction experience he or she has made with the service provider (Crosby, Evans, & Cowles, 1990). Based on this review, customer satisfaction is dened as the result of a cognitive and affective evaluation, where some comparison standard is compared to the actually perceived performance. The satisfaction judgment is related to all the experiences made with a certain supplier concerning his products, the sales process, and the after-sale service.

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CUSTOMER LOYALTY The modeling of loyalty has a long history in the academic literature. Within the marketing discipline, articles dealing with the subject of brand loyalty can be traced back to the early 1920s (see Copeland, 1923). The majority of early loyalty studies conceptualized loyalty behaviorally, as a form of repeat purchasing of a particular product or service over time. Although some authors focused on the sequence in which brands were purchased (Brown, 1952; H. Churchill, 1942), others measured loyalty through the proportion of purchases devoted to a given brand (Brody & Cunningham, 1968; Cunningham, 1956). A third group concentrated on stochastic measures like probability of purchase (Farley, 1964; Frank, 1962; Lipstein, 1959). Finally, some authors combined several behavioral criteria in their empirical studies (Frank, Massy, & Lodahl, 1969; Tucker, 1964). In his frequently quoted article, Day (1969) criticizes the use of solely behavior-based loyalty measures because these do not distinguish between true loyalty and spurious loyalty: The key point is that these spuriously loyal buyers lack any attachment to brand attributes, and they can be immediately captured by another brand that offers a better deal . . . (p. 30). Accordingly, he suggests a two-dimensional conceptualization of loyalty adding an attitudinal dimension to the behavioral component. Consistent with this perspective, Jacoby (1971) provides a conceptual denition of brand loyalty that stresses the importance of a conscious evaluation process leading to loyal behavior, thus excluding random repeat purchasing (see also Jacoby and co-workers, 1978, 1973, 1970). Recent research has tended to adopt this two-dimensional conceptualization of loyalty (e.g., Dick & Basu, 1994; Oliver, 1997; Pritchard, Howard, & Havitz, 1992). Thus, this perspective will also be used in this study.

THE RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY The literature pertaining to the relationship between customer satisfaction and loyalty can be organized in three categories. A rst group of authors provide empirical evidence of a positive relationship between customer satisfaction and loyalty without further elaboration. Other studies investigate the functional form of the relationship between customer satisfaction and loyalty. Finally, a third category of research examines effects of moderator variables on the relationship between the two constructs. Within the rst research stream, Bitner (1990) shows that satisfaction has an indirect effect on loyalty mediated by perceived quality. Fur-

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thermore, her results (obtained in a services context) reveal that loyalty is also inuenced directly by satisfaction. Similarly, Rust and Zahorik (1993) and Rust, Zahorik, and Keiningham (1995) nd a link between customer satisfaction and loyalty using data from the retail bank market and from a national hotel chain. Additional empirical evidence for a positive relationship between the two constructs is provided by E. W. Anderson et al. (1994), Biong (1993), Hallowell (1996), Halstead and Page (1992), Taylor and Baker (1994), and Woodside, Frey, and Daly (1989). Within a marketing channels context, research by Gassenheimer, Sterling, and Robicheaux (1989) and Ping (1993) supports the existence of a positive satisfaction loyalty link. Although research within the rst category has typically been based on the explicit or implicit assumption of a linear relationship, researchers within the second stream have provided theoretical and empirical support for a more complex (i.e., nonlinear) structure. As an example, Heskett, Jones, Loveman, Sasser, and Schlesinger (1994) provide conceptual support for a convex structure of the relationship, that is, increasing marginal returns. Jones and Sasser (1995) argue that such a convex structure is likely to occur mainly in highly competitive environments. Empirical support for a convex relationship is provided by Auh and Johnson (1997). Woodruff, Cadotte, and Jenkins (1983) suggest a saddle curve shape of the relationship, implying that low or high satisfaction levels should increase a customers likelihood of reacting in some way. At some medium satisfaction level customers might nd themselves in a so-called zone of indifference. Within this interval, satisfaction has only a small impact on customer loyalty (see also Finkelman & Goland, 1990; Finkelman, Cetlin, & Wenner, 1992). Finally, ndings by Oliva et al. (1992) indicate that, depending on the magnitude of transaction costs, the relation between customer satisfaction and loyalty can be both linear and nonlinear. A third and very limited group of studies examines the existence of external factors moderating the relationship between satisfaction and loyalty. Applying moderated regression analysis, Bloemer and co-workers (1995, 1996) nd that involvement has a positive moderating effect on the link between satisfaction and loyalty. The fact that the issue of moderating effects on the relationship between satisfaction and loyalty has received limited attention in the literature shows that this research lls a gap.

CONCEPTUAL BACKGROUND First, hypotheses on the main effects of different dimensions of customer satisfaction on loyalty are developed. Then possible moderators of the linkage between satisfaction and loyalty are introduced. The focus is on personal characteristics as suggested moderator variables.

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Hypothesized Main Effects between Satisfaction and Loyalty As pointed out earlier, a three-dimensional conceptualization of satisfaction is used, including satisfaction with the product, satisfaction with the sales process, and satisfaction with the after-sale service. Consistent with the denition of customer satisfaction provided above, these three dimensions comprise cognitive as well as affective aspects (see also Oliver, 1993). In accordance with previous research (Forbes, Tse, & Taylor, 1986; Fornell & Wernerfelt, 1987; Patterson, Johnson, & Spreng, 1997), it is hypothesized that all three satisfaction dimensions have a positive effect on customer loyalty. Hence, the hypotheses for the main effects are as follows:
H1: Satisfaction with the product has a positive inuence on customer loyalty. H2: Satisfaction with the sales process has a positive inuence on customer loyalty. H3: Satisfaction with the after-sale service has a positive inuence on customer loyalty.

Suggested Moderator Variables of the Relationship between Satisfaction and Loyalty Based on a review of the literature related to personal determinants of buying behavior, ve personal characteristics are supposed to have a moderating impact on the linkage between customer satisfaction and loyalty. Three demographic and two psychological factors were chosen, in order to see if there were differences in their explanatory power. Each of these factors has been found to be relevant in the context of customer satisfaction and/or loyalty in previous studies. A brief discussion of each of the ve potential moderators follows. Gender. The impact of gender on buying behavior has attracted some research interest (e.g., Jasper & Lan, 1992; Slama & Tashlian, 1985; Zeithaml, 1985). Womens purchasing behavior is found to be strongly inuenced by their evaluation of personal interaction processes. Compared to men, women are more involved in purchasing activities (Slama & Tashlian, 1985), and pay more attention to the consulting services of the sales personnel (Gilbert & Warren, 1995). Based on these arguments, lead to the suggestion that gender might moderate the linkages between the three satisfaction dimensions and loyalty. As an example, one might predict that the loyalty effect of satisfaction with the sales process is stronger for women than for men, whereas the impact of product satisfaction on loyalty might be stronger for men.

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Age. Age is another demographic characteristic that has attracted considerable research attention. Research comparing young and elderly customers has concentrated on differences in the information-processing abilities needed to evaluate a product (Moscovitch, 1982; Roedder John & Cole, 1986; Smith & Baltes, 1990; Walsh, 1982). Most of theses studies conclude that information processing declines with age (Gilly & Zeithaml, 1985). Older people have restricted information-processing capabilities; therefore their reactions to satisfaction shifts might also change. Hence, age is suggested to be another moderator of the linkages between satisfaction and loyalty. Income. The income of a person is assumed to have a strong impact on choice decisions (Zeithaml, 1985). In a general sense, it is assumed that people with higher income have achieved a higher level of education (Farley, 1964). Thus, they usually engage more in information processing prior to the decision process (Schaninger & Sciglimpaglia, 1981), and their choice is essentially based on the evaluation of the information given to them. Due to their cognitive capacities they are supposed to feel more comfortable when dealing with and relying on new information inputs (Hoyer, 1984; Spence & Brucks, 1997). Hence, income is suggested as another demographic characteristic that might affect the consequences of (dis)satisfaction. Involvement. A lot of research in recent years has focused on involvement as a central variable inuencing purchase decisions (e.g., Beatty, Kahle, & Homer, 1988; Burton & Netemeyer, 1992; Kapferer & Laurent, 1993; Mittal, 1995; Zaichkowsky, 1985; Zaichkowsky & Sood, 1988). The concept of involvement has been discussed for about three decades in the consumer-behavior literature and even longer in psychology (Muncy & Hunt, 1984). Although there is some disagreement concerning the precise denition of involvement, most researchers agree that the level of involvement is associated with the level of perceived personal relevance or importance of a specic product category to the customer (Celsi & Olson, 1988; Flynn & Goldsmith, 1993; Gotlieb, Schlacter, & St. Louis, 1992). Current theory holds that high customer involvement in a product will lead to extensive interest in and search of product-related information (Bloch & Richins, 1983; Mittal, 1989; Richins & Bloch, 1986). Hence, involvement is expected to moderate the linkages between satisfaction with the sales process as well as satisfaction with the aftersale service and loyalty. Consistent with previous ndings, no moderating effect of involvement on the relationship between satisfaction with the product and loyalty is assumed (see Bloemer et al., 1996). Variety Seeking. The phenomenon of variety seeking is a much-discussed topic. Its antecedents, determinants, implications, and correlates

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have been investigated by psychologists, consumer behaviorists, marketers, and economists. The basic idea behind the concept of variety seeking is that under certain conditions everyone has a need for variety in his daily life (Faison, 1977). When customers seek variety, they have wants and needs that cannot be lled best by a single brand, but by a purchase history involving consistent switching among brands (Feinberg, Kahn, & McAllister, 1992; Lattin & McAlister, 1985). Thus, customers seek variety in product choices in order to avoid feelings of monotony and boredom (Menon & Kahn, 1995). Different types of variety seeking have been identied in the literature (see McAlister & Pessemier, 1982 for an interdisciplinary review). Variety seeking is seen as an intrinsically motivated phenomenon. Thus, variation in behavior that is instigated by the instrumental or functional value of the alternatives is not included (see also van Trijp and co-workers, 1995, 1996). Intrinsically motivated variety seeking means that a customer switches brands only for the sake of variety and the stimulation it brings to the situation, irrespective of his satisfaction with the original brand and the consequences implied by his switching behavior (Raju, 1980; Steenkamp & Baumgartner, 1992). Hence, in this context, it is proposed that a customer s drive for variety will inuence the relationship between satisfaction with the product and loyalty. Because variety seeking is regarded as a product-related phenomenon, meaning that people with a high need for variety will express this intrinsic motivation in some product categories, but not others (van Trijp, Hoyer, & Inman, 1996), no moderating effect of variety seeking is expected on the linkages between satisfaction with the sales process or satisfaction with the after-sale service and loyalty. METHOD Sample Questionnaires that operationalized the satisfaction and the loyalty construct as well as the moderator variables were sent to 3000 randomly selected customers of a German car manufacturer who had bought a new car 2 years ago. The 2-year delay between the purchase and the survey was necessary for two reasons: rst, to make sure that the customers had gained enough experience with the car as well as the services offered by the car manufacturer, and second, to nd respondents who were ready to think about a new car. A total of 943 usable responses were returned, representing a response rate of 31.4%. Measures Most of the constructs in this study were measured by means of multiitem scales. Item generation was based on interviews with customers

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as well as managers from the automotive industry and a review of the extant literature. A multidimensional scale was used to measure customer loyalty. As pointed out earlier, previous research suggests that customer loyalty consists of a behavioral and an attitudinal component. A customers positive attitude toward a certain suppliers product is captured through his willingness to recommend the product to others. Hence, it is suggested that recommendation behavior occurs when the customer has a positively valanced attitude toward a certain product and perceives this product as being superior to the products of alternative suppliers (see also Dick & Basu, 1994, p. 101). In addition to the customers recommendation behavior and his intention to repurchase the product, a third dimension of customer loyalty is conceptualized the customers intention to repurchase the product from the same distributor. Previous work focusing on consumer durables (e.g., Johnson, Herrmann, Huber, & Gustaffson, 1997) shows that, besides repurchase and recommendation of the product itself, the intention of staying loyal to the distributor embodies another important component of customer loyalty. In order to assess measurement validity, conrmatory factor analyses were run with LISREL 8 (Jo reskog & So rbom, 1993). Conrmatory factor analysis is considered to be superior to more traditional criteria such as coefcient alpha in the context of scale validation, because less-restrictive assumptions apply (J. C. Anderson & Gerbing, 1993; Bagozzi, Yi, & Phillips, 1991; Gerbing & Anderson, 1988). Table 1 shows the values of composite reliability gained on the basis of conrmatory factor analysis. Analyses were conducted separately for the three satisfaction dimensions, the three loyalty dimensions, and the moderating factors. Composite reliability represents the shared variance among a set of observed variables measuring an underlying construct (Fornell & Larcker, 1981). Generally, a composite reliability of at least .6 is considered desirable (Bagozzi & Yi, 1988, p. 82). This requirement is met for every factor. Analysis Figure 1 provides an overview of the hypothesized main effects with the use of the well-known LISREL notation. Given the hypothesized threedimensional conceptualization of loyalty, hypotheses H1 H3 are operationalized in this model in the following way: The rst two dimensions of satisfaction are assumed to affect all three components of loyalty (H1, H2), whereas satisfaction with the after-sale service is expected to have an effect only on loyalty to the distributor (H3). It is thus proposed that a customers evaluation of the after-sale service is exclusively based on his assessment of the car dealers performance and, hence, is unrelated to the two product-related loyalty dimensions. In a rst step, the main hypotheses (H1 H3) were tested. LISREL 8
CUSTOMER SATISFACTION AND LOYALTY 51

Table 1.

Validation of construct measures Factor Number of Items 3 4 11 2 3 1 2 3 Composite Reliability .79 .89 .92 .93 .89 .63 .63

Satisfaction with the product Satisfaction with the sales process Satisfaction with the after-sales service Recommendation of the product Product repurchases intention Distributor repurchase intention Involvement Variety seeking

was used to estimate the system of equations represented in Figure 1 (see Jo reskog & So rbom, 1993). Next the inuence of moderator variables on the postulated relationships between satisfaction and loyalty were analyzed. Empirical techniques for evaluating moderator effects include moderated regression analysis and multiple-group LISREL. The rst one is commonly used within the behavioral sciences (see Arnold, 1982; Darrow & Kahl, 1982 for overviews). Though moderated regression analysis is a widely accepted technique in marketing research, multiple-group LISREL was considered to be a more appropriate method in this case, because relationships among latent constructs are considered. Median splits were conducted in this sample based on the values of the moderator variables. That is, for every moderator variable, multiplegroup LISREL was performed comparing two subsamples, one with high versus one with low values of the moderator variable (as far as gender is concerned, males and females were compared, respectively). More specically, two models that are different only with respect to the effect of one satisfaction dimension on one loyalty dimension (one parameter) were compared. One model restricts this parameter to be equal across groups whereas the more general model allows this parameter to vary across groups. Because these are nested models with the general model having one degree of freedom less than the restricted model, the 2 value will always be lower for the general model than for the restricted model. The question is whether the improvement in 2 when moving from the restricted to the more general model is signicant. This would indicate differential effects of satisfaction on loyalty in the two subsamples, thus supporting the hypothesis of a moderator effect. Signicance can be assessed on the basis of the 2-difference between the two models with the use of a 2 distribution with one degree of freedom. The critical value at the .05 level is 3.84. RESULTS Table 2 gives the results of the model shown in Figure 1. Goodness-oft index (GFI) and adjusted goodness-of-t index (AGFI) are two de-

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CUSTOMER SATISFACTION AND LOYALTY

53

Figure 1. Causal Model of Effects between Customer Satisfaction and Loyalty

Table 2.

Estimates of structural equation coefcients Parameter Parameter value (standardized) 0.44 0.60 0.12 0.16 0.26 0.44 0.24 t value 15.84 19.98 3.66 6.37 9.64 8.38 4.94

11 21 31 12 22 32 33

scriptive overall t measures for which a threshold value of 0.9 usually is recommended (Baumgartner & Homburg, 1996; Bagozzi & Yi, 1988). The current model meets these criteria (GFI 0.99 and AGFI 0.98). RMSEA is a t measure that is based on the concept of noncentrality (Steiger, 1990). Values up to 0.05 usually are considered to indicate a good model t. In this case, RMSEA is 0.045. Thus, although the 2 statistic is signicant (2 711.57, DF 243, p .01), it is concluded that the model ts the data reasonably well. All parameters are signicant at the 1% level, supporting H1 H3. Thus, all of the hypothesized main effects of satisfaction on loyalty are supported by the ndings. Particularly strong effects of satisfaction with the product on recommendation behavior as well as product repurchase intention were observed. Another strong effect is observed between satisfaction with the sales process and the intention to repurchase at the same distributor. Once support for the main effects was found, the next step was to turn to the suggested moderator effects in order to gain deeper insights into the relationship between customer satisfaction and loyalty. In a rst step, an overall 2 difference test was conducted for each of the moderator variables. Here, a model that imposes equality constraints on all seven parameters across subgroups and a general model that allows all of these parameters to vary freely across subgroups were compared. Thus, this test evaluates the null hypothesis that the respective moderator variable does not have any effect on the relationship between satisfaction and loyalty. As can be seen from Table 3, this null hypothesis was rejected for each of the ve moderator variables (2 14.07, DF 7). This nding shows that the moderator variables, in general, are relevant in the context of the satisfaction loyalty link. The article now turns to analysis of the specic moderating effects. Results of the moderator analysis are shown in Table 3. As far as gender is concerned, the results show a signicant moderating impact for only two out of the seven effects (31 and 22). Inspection of the corresponding parameter estimates indicates that satisfaction with the product has a signicant effect on the intention to repurchase

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Table 3.

Results of multiple-group analysis Gender Male Female Chi-square difference (DF 1) 2 0.14 2 0.68 2 4.14* 2 0.33 2 5.73* 2 0.13 2 0.27

11 0.44 (t 15.49) 21 0.61 (t 19.38) 31 0.14 (t 4.28) 12 0.15 (t 5.77) 22 0.24 (t 8.49) 32 0.43 (t 7.98) 33 0.23 (t 4.58)
2

11 0.42 (t 4.08) 21 0.49 (t 4.67) 31 0.12 (t 0.92) 12 0.20 (t 2.65) 22 0.45 (t 5.94) 32 0.53 (t 2.01) 33 0.37 (t 1.66)
Age

for all gammas set equal across subgroups (DF 7): 16.57.*

Old

Young

Chi-square difference (DF 1) 2 7.15* 2 13.25* 2 20.21* 2 2.03 2 13.31* 2 7.43 2 0

11 0.56 (t 8.04) 21 0.84 (t 9.94) 31 0.44 (t 5.13) 12 0.00 (t 0.01) 22 0.07 (t 0.01) 32 0.16 (t 1.44) 33 0.18 (t 2.08)
2

11 0.42 (t 6.96) 21 0.47 (t 9.13) 31 0.04 (t 0.63) 12 0.14 (t 3.53) 22 0.40 (t 10.65) 32 0.66 (t 4.05) 33 0.19 (t 1.16)
Income

for all gammas set equal across subgroups (DF 7): 41.42.*

High

Low

Chi-square difference (DF 1) 2 8.37* 2 12.95* 2 6.8* 2 17.03* 2 21.53* 2 0.72 2 1.06

11 0.41 (t 7.17) 21 0.53 (t 8.81) 31 0.10 (t 1.62) 12 0.24 (t 5.17) 22 0.36 (t 7.50) 32 0.32 (t 2.89) 33 0.34 (t 3.69)
2

11 0.88 (t 4.92) 21 1.40 (t 3.07) 31 0.47 (t 3.32) 12 0.37 (t 1.83) 22 0.71 (t 1.46) 32 0.12 (t 0.57) 33 0.19 (t 1.57)

for all gammas set equal across subgroups (DF 7): 30.95.* Involvement High Low Chi-square difference (DF 1) 2 3.66 2 5.82* 2 0.01 2 0.01

12 0.11 (t 2.94) 22 0.19 (t 4.46) 32 0.47 (t 5.12) 33 0.23 (t 2.76)

12 0.21 (t 5.38) 22 0.34 (t 8.05) 32 0.46 (t 5.35) 33 0.25 (t 3.23)

2 for all gammas set equal across subgroups (DF 7): 20.05.* Variety Seeking High Low Chi-square difference (DF 1) 2 5.16* 2 11.34* 2 5.88*

11 0.39 (t 9.05) 21 0.55 (t 12.33) 31 0.01 (t 0.20)

11 0.60 (t 10.76) 21 0.80 (t 12.09) 32 0.18 (t 3.04)

2 for all gammas set equal across subgroups (DF 7): 28.13.*
*Chi-square difference is signicant at the 5% level.

at the same distributor for men but not for women (31). Hence, a mans decision to buy the next car at the same car dealer is strongly determined by his satisfaction with the functionality of the product itself. On the other hand, a womans loyalty to a certain distributor is not determined by her satisfaction with the product. Instead, personal interaction processes seem to have a major impact on a womans buying decision. As indicated by these results, satisfaction with the sales process has a stronger impact on a womens decision to repurchase a certain product (22). Zeithamls (1985) empirical results also show that women rely more on the information they receive during their interaction with the salespeople than men. Table 3 shows a positive moderator effect of age on the relationship between satisfaction with the product and loyalty for all three loyalty dimensions (11, 21, 31). This nding might be caused by the so-called crystallized abilities (Horn, 1982; Light, 1991). Crystallized abilities reect the knowledge of a specic problem content as a result of learning and experience and increase over lifetime (Sorce, 1995). Thus, when making a buying decision, older people are likely to focus on their experience-based evaluation of the products key features (Phillips & Sternthal, 1977). On the other hand, younger people do not rely that strongly on their satisfaction with the product itself but seem to base their buying decision primarily on the information provided to them by the sales personnel. The results support this view, showing that for younger people satisfaction with the sales process has a stronger impact on two out of the three loyalty dimensions (22, 32). The analysis of income as a moderator variable reveals that the relationship between satisfaction with the product and loyalty is weaker for people with high income than it is for people with low income. This result is achieved with regard to all three loyalty dimensions (11, 21, 31). Hence, product satisfaction is less important for people with high income. One possible reason for this nding might be that nancial risk associated with the purchase of a poor-quality product is lower for people with high income (Jacoby & Kaplan, 1972; Murray & Schlacter, 1990). Furthermore, the results show that income moderates the relationship between satisfaction with the sales process and loyalty positively, but only two of these effects show statistical signicance (12 and 22). As mentioned earlier, high income is often supposed to go along with a higher level of education. Hence, the quality of the relationship and the information exchange between the salesperson and the highincome customer might possibly be higher and therefore largely determine the probability of continued customer loyalty. The empirical results for involvement show only one moderating effect on the satisfaction loyalty link: Involvement weakens the inuence satisfaction with the sales process has on the intention to repurchase a product (22). That is, because of a highly involved persons greater expertise with the product category, he or she has little need for infor-

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mation during the actual purchase decision (Heslin & Johnson, 1992). Hence, he or she does not put much emphasis on the consulting and advisory activities during the sales process. Finally, variety seeking has a negative moderator effect on the relationship between satisfaction with the product and all three loyalty dimensions (11, 21, 31). Thus, the impact of satisfaction with the product on loyalty is weaker for people with a strong drive for variety. This nding is consistent with the current interpretation of variety seeking as an intrinsically motivated phenomenon, meaning that the customer switches brands only for the sake of variety, irrespective of his/her satisfaction with the actual brand (Raju, 1980; Steenkamp & Baumgartner, 1992).

DISCUSSION Research Implications Previous research has largely neglected the issue of moderator effects on the relationship between satisfaction and loyalty. Against this background, the moderating impact of selected personal characteristics on the satisfaction loyalty link was analyzed. With the use of multiplegroup causal analysis, signicant differences were found across subgroups concerning the satisfaction loyalty link for each of the moderators. More specically, variety seeking, age, and income are found to be important moderators of the satisfaction loyalty link. Less evidence for moderating effects is found for gender and involvement. Thus, this research makes a signicant contribution to a better understanding of the link between customer satisfaction and loyalty. This research also provides an improved understanding of the role of personal characteristics in the context of customer loyalty. Early work by Brody and Cunningham (1968) and Frank (1967) based on panel data or experimental research designs indicates that demographic and personality variables are of negligible value when one is attempting to predict brand loyalty. Thus, these early ndings indicate that there are no direct effects of these variables on loyalty. Based on advanced multivariate analysis, however, this study shows that personal characteristics are relevant as moderators of the relationship between customer satisfaction and loyalty. The results also emphasize the importance of studying demographic characteristics as determinants of buyer behavior. Much of the more recent research in many areas of consumer behavior has abandoned demographic factors and shifted attention to psychological constructs. There is no doubt that these constructs explain many of the individuallevel phenomena more adequately than general demographic factors. Nevertheless, the results strongly indicate that demographic character-

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istics such as age and income do play an important role as moderators of relationships between psychological and behavioral constructs. A key benet of incorporating demographics in studies of consumer behavior is that those factors are much easier to measure and, therefore, easier to handle for marketing practitioners. Hence, the authors claim that managerial relevance of consumer behavior research is increased when demographics are incorporated into the research design. In many situations a customers demographic characteristics do both effect and reect his psychological state, his values, and his behavior (e.g., Areni, Kiecker, & Palan, 1998; Dickerson & Gentry, 1983; Kalyanam & Putler, 1997; Reinartz & Kumar, 1999; Timmer & Kahle, 1983). Additionally, previous research in the area of customer satisfaction and loyalty has typically used fairly simple conceptualizations (e.g., Biong, 1993; Bloemer & Kasper, 1995; Halstead & Page, 1992). Frequently, the constructs are conceptualized in a unidimensional way. The ndings indicate that this view may be too simplistic and that the use of multidimensional construct conceptualizations may be benecial. From a methodological perspective, this study illustrates how causal modeling can be used to analyze moderator effects. Most previous research on moderator effects has used moderated regression analysis. Especially when analyzing relationships between latent constructs, multiple-group causal modeling seems more appropriate because it allows the simultaneous estimation of measurement parameters and structural relationships.

Management Implications This study has several managerial implications. The rst relates to the impact customer satisfaction has on customer loyalty. In contrast to the doubts some managerial writers have raised concerning the consequences of customer satisfaction, the empirical results clearly indicate that increasing customer satisfaction leads to increasing customer loyalty. Thus, managers are encouraged to reduce customer switching rates through investments in the satisfaction of their customers. However, within this context, managers must have a careful look at the different dimensions of satisfaction and their impact on loyalty. As an example, the ndings demonstrate that satisfaction with the sales process and satisfaction with the after-sales service have a much stronger effect on a customers intention to stay loyal to a distributor than is the case for satisfaction with the product itself. Third, the results provide managers with a detailed understanding of which customers have the strongest satisfaction loyalty link.. These ndings can be used for the purpose of resource allocation in customersatisfaction programs. These resources should primarily be used to satisfy those customers that exhibit a strong link between satisfaction and

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loyalty. As an example, the ndings suggest that it is very important to focus on satisfaction of younger customers with the sales process. Additionally, activities for increasing customer loyalty (such as customer clubs or bonus programs) should focus on those customers that exhibit a weaker satisfaction loyalty relationship. As an example, it might make sense to identify variety seekers among the companys customers and to target them with a retention program. Limitations and Directions for Future Research The results of this study need to be viewed in the light of its limitations. These limitations, along with the studys ndings, suggest directions for further research. First, only the customers of one company in the automotive industry have been investigated. The measurement scales and the model both need to be validated in other industries before generalization can be made. Additionally the current research focuses on consumer durables. Applying the model to other contexts, such as consumer services, would provide an interesting and fruitful area for further research. In addition, future research could also address the broad issues of transferring the current model to the area of business-to-business marketing. In this context, organizational characteristics of the buying rm as well as relational characteristics of the buyer supplier relationship might have a strong moderating inuence on the relationship between satisfaction with a supplier and loyalty. Furthermore, only the impact of moderator variables that have an effect on the strength of the relationship were investigated. Hence, there was no analysis of whether these variables also affect the functional form of the link between satisfaction and loyalty. The ndings of this study highlight the need for more comprehensive models of the relationship between customer satisfaction and loyalty. The current model concentrates on selected characteristics of the individual customer as moderating factors. A number of other personality traits (e.g., uncertainty orientation of the customer) that were not considered in this study can also have a moderating impact on the relationship between satisfaction and loyalty. Further, characteristics of the supplier or the suppliers market (e.g., competitive intensity, reputation of the supplier) may affect the strength of this link. Future research needs to examine this issue more closely. Given the complex nature of the relationship between customer satisfaction and customer loyalty, the study has barely scratched the surface of research that needs to be completed. The illustrations show that the relationship between satisfaction and loyalty differs among different customers. Ideally, future research should build upon this conclusion and attempt to provide further insight into the nature of this relationship under different conditions.

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