How quality, value, image, and satisfaction create loyalty at a chinese telecom

How quality, value, image, and satisfaction create loyalty at a chinese telecom Customer satisfaction

How quality, value, image, and satisfaction create loyalty at a Chinese telecom ☆ Fujun Lai a,1 , Mitch Griffin b, ⁎ , Barry J. Babin c,2 a College of Business University of Southern Mississippi-Gulf Coast, Long Beach, MS 39560, United States b Department of Marketing, Foster College of Business, Bradley University, Peoria, IL 61625, Bradley University, United States c The Max P. Watson, Jr. Professor of Business, Louisiana Tech University, Ruston, LA 71272, United States abstractarticle info Article history: Received 1 August 2007 Received in revised form 1 September 2008 Accepted 1 October 2008 Available online xxxx Keywords: Value Satisfaction Loyalty Image Mobile communications China This study proposes and tests an integrative model to examine the relations among service quality, value, image, satisfaction, and loyalty in China. Analysis of survey data from 118 customers of a Chinese mobile communications company reveals that service quality directly influences both perceived value and image perceptions, that value and image influence satisfaction, that corporate image influences value, and that both customer satisfaction and value are significant determinants of loyalty. Thus, value has both a direct and indirect (through satisfaction) impact on customer loyalty. Other variables mediate the impact of both service quality and corporate image on customer loyalty. © 2008 Elsevier Inc. All rights reserved. 1. Introduction Telecommunication companies are advancing technology tremen- dously. As a result, they face intense competition, including competi- tion from sources not previously existing. Perhaps nowhere is this competition more challenging than in China. The Chinese mobile communications market is now the largest total market and remains fast-growing, dynamic, and vibrant (Nie and Zeng, 2003). Over half a billion Chinese consumers own and use a mobile phone (Nie and Zeng, 2003). The Chinese government's recent restructuring of state-owned monopolistic telecommunication system and further deregulation has led to a more open and free market system (Wang et al., 2004). In January 2002, the Chinese government changed policy, allowing four major telecommunication companies (China Mobile, China Netcom, China Telecom, and China Unicom) to offer fixed network telecom- munication, mobile communication, and other basic communication services. Today, the Chinese telecommunication industry is intensely competitive (Loo, 2004). How does a firm survive under such turbulent conditions? Tradition- ally, mobile and land phone providers competed fiercely for new customers. In the U.S., customers were provided with financial incentives to sign up or switch service from one provider to another. Over time, and with the increased saturation of the market, companies have come to realize their performance can improve by focusing more on retaining customers than constantly acting in a conquest mode. As the Chinese market provides an increasing range of opportunities for consumers, how can telecommunication service providers maintain customer loyalty? The present study tests a model of customer loyalty among customers of a telecommunications firm in a collectivist society. The model examines the inter-connections among evaluation of service quality, customer perceived value, perceptions of corporate image, customer satisfaction, and loyalty. The research offers theoretical contributions and extends our understanding of consumer loyalty. Additionally, those providing technological services in collectivist cultures will find practical insight. 2. Background, theoretical development, and research hypotheses 2.1. The need for the study Although customer loyalty is increasingly seen as a prime determi- nant of long-term financial performance in competitive markets (Jones and Sasser, 1995; Reichheld, 1996), there are clear gaps in our knowledge of the antecedents of loyalty. First, and the primary purpose of this research, is to examine an integrated model of loyalty. While quality, consumer satisfaction, and value are viewed as key building blocks of customer loyalty (Babin and Attaway, 2000; Bolton and Drew, 1991; Zeithaml, 1988), research generally considers only the simple bivariate links between service evaluation (quality, satisfaction, and value), image, and loyalty which may mask true relationships. Journal of Business Research xxx (2008) xxx–xxx ☆ The authors appreciate the reviewers' comments and Michel Laroche's guidance throughout the revision process. ⁎ Corresponding author. Tel.: +1 309 677 2287; fax: +1 309 677 3374. E-mail addresses: fujun.lai@usm.edu (F. Lai), mg@bradley.edu (M. Griffin), bbabin@latech.edu (B.J. Babin). 1 Tel.: +1 228 865 4529; fax: +1 228 865 4588. 2 Tel.: +1 318 257 4012; fax: +1 318 257 4253. JBR-06699; No of Pages 7 0148-2963/$ – see front matter © 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2008.10.015 Contents lists available at ScienceDirect Journal of Business Research ARTICLE IN PRESS Please cite this article as: Lai F, et al., How quality, value, image, and satisfaction create loyalty at a Chinese telecom, J Bus Res (2008), doi:10.1016/j.jbusres.2008.10.015 Second, research examining corporate image focuses mostly on goods producing firms and on retail stores (e.g. Bloemer and Ruyter, 1997; Donovan and Rossiter, 1982; Dowling, 1988; Mazursky and Jacoby, 1986; Nguyen and LeBlanc, 1998). Little work reports on customers' image assessments of service firms. Further, researchers have not integrated the role of corporate image into customer loyalty, especially among high- tech service firms or service firm consumers outside the U.S.A. Third, most previous service research examines a western cultural context. U.S. and European consumers participate in and are socialized within a predominantly capitalistic marketplace (Trompenaars, 1994). Applying western-developed theory and theoretical inter-connections between consumer service evaluations and true customer loyalty may not be universally appropriate. Researchers argue that cultural idiosyn- cratic characteristics may result in different relationship patterns and different strengths of relationships across cultures (Clark, 1990; Dabholkar, 1995). Limited evidence suggests that consumers do not become loyal the same way in different cultures. For example, one study of German mobile communication consumers finds service price, phone number portability, and benefit perception most affect loyalty (Gerpott et al., 2001). A study of Korean consumers, on the other hand, reports brand image, perceived service quality, and the perceptions of switching costs better determine loyalty (Kim et al., 2004). Research examining Turkish mobile communications consumers suggests service quality is necessary, but insufficient, to create loyalty (Aydin and Ozer, 2005). Lee et al. (2001) find that switching costs strongly affect the satisfaction → loyalty relationship for French mobile consumers. Finally, Lee and Ulgado (1997) find corporate image, low price, and consistent quality affect U.S. consumer loyalty. Generally, Asian cultures see the less tangible characteristics of service as more important (Mattila, 1999). Marketers face a challenge in applying western-derived theory in China where rapid economic growth, social transition, and a unique culture shape consumer behavior (Zhao et al., 2006a). Thus, Chinese consumers' reactions to service providers and loyalty formation may be quite unique. On the other hand, the core constructs are likely universal and the relationship among them could remain reasonably consistent across cultural and structural contexts. To summarize, the current study simultaneously examines the relationship among service quality, per- ceived value, customer satisfaction, corporate image, and customer loyalty among Chinese consumers. Fig. 1 displays the proposed model. 2.2. Service quality, value, and satisfaction Several researchers examine links between and among service quality, value, and satisfaction (e.g. Cronin et al., 2000; Garbarino and Johnson, 1999; Spreng et al., 1996). Not surprisingly, they find that high service quality and high value correlate with relatively high customer satisfaction (e.g. Cronin et al., 2000). While some suggest that satisfaction drives quality, the preponderance of evidence indicates that quality drives satisfaction (Dabholkar,1995). The basis of links from service quality and value to satisfaction is Bagozzi's (1992) and Lazarus' (1991) framework of appraisal → em otional response → coping. Adapting the framework to a service context suggests that the more cognitively-oriented service quality and value appraisals may lead to emotive satisfaction, which in turn drives loyalty (e.g. Chenet et al., 1999; Ennew and Binks, 1999; Woodruff, 1997). Overall the service quality → satisfaction causal order receives considerable support and empirical validation (Brady and Robertson, 2001; Gotlieb et al.,1994). Further, the quality → satisfaction link holds up across different cultures and explains more variance in customer loyalty (Brady and Robertson, 2001). Therefore, the first hypothesis is: H 1 . Service quality has a significant, positive effect on customer satisfaction. In addition to the studies above, Fornell et al., (1996) report that the top two determinants of customer satisfaction are perceived quality and perceived value. Thus, the second hypothesis is: H 2 . Perceived value has a significant, positive effect on customer satisfaction. Value is at the heart of what consumers pursue from a marketing exchange. While value is operationalized in different ways, the general definition of value is a consumer's perception of the subjective worth of some activity or object considering all net benefits and costs of consumption (Babin et al., 1994). In the present study, the relevant consumption act is the overall service received from a telecommunication provider. Perceived quality will positively influence value, while price/ cost will negatively influence value (Chang and Wildt, 1994; Hellier et al., 2003). Logically, high quality is not a prerequisite for value because a reduction in quality can be offset by lower overall costs. However, research supports a positive relationship between quality and value (e.g. Andreassen and Lindestad, 1998; Choi et al., 2004; Cronin et al., 2000; Zins, 2001). Therefore, the third hypothesis is: H 3 . Service quality has a significant, positive effect on perceived value. 2.3. Corporate image Corporate image is another important factor in the overall service evaluation (Bitner, 1991; Grönroos, 1988; Gummesson and Grönroos, 1988). According to Grönroos (1988) and Keller (1993), corporate image is a perception of an organization held in consumer memory and works Fig. 1. Conceptual model. 2 F. Lai et al. / Journal of Business Research xxx (2008) xxx–xxx ARTICLE IN PRESS Please cite this article as: Lai F, et al., How quality, value, image, and satisfaction create loyalty at a Chinese telecom, J Bus Res (2008), doi:10.1016/j.jbusres.2008.10.015 as a filter which influences the perception of the operation of the company. Attitude theory suggests that service evaluations are the leading cause of corporate image and that these attitudes increase in predictive value as they become more accessible in memory (Fazio, 1989; Fazio and Zanna, 1978). Direct experience makes attitudes more accessible and more predictive of future behaviors. Oliver (1980) claims that a consumer's attitude towards a product/service choice is a function of the consumer's initial attitude at the time of purchase/encounter and his or her satisfaction with a particular consumption experience. Selnes (1993) posits that performance quality affects a global, more general, evaluation of the brand. Along the same line, Ostrowski et al. (1993) examine airline service and arguing that “positive experience over time (following several good experiences) will ultimately lead to positive image” (p.23). Corporate image stems from all of a customer's consumption experiences, and service quality is representative of these consumption experiences. Hence, the perception of service quality directly affects the perception of corporate image (Aydin and Ozer, 2005): H 4 . Service quality has a significant, positive effect on corporate image. Andreassen and Lindestad (1998) posit that corporate image, through a filtering effect, impacts a customer's evaluation of service quality, value, and satisfaction. In other words, corporate image creates a halo effect on customer satisfaction. In this study, a cumulative or relational level measure reflecting a customer's overall impression and mental picture of the firm represents corporate image (Bloemer et al., 1998; Zimmer and Golden, 1988). Consumers who develop a positive mental schema of a brand will tend toward high customer satisfaction through a halo effect where all things associated with the brand are similarly valenced. As such: H 5 . Corporate image has a significant, positive effect on customer satisfaction. Value extends in its conception beyond the functional aspect to include the more hedonic, social, emotional, and experiential compo- nents (Babin et al., 1994; Holbrook, 1994). A positive image makes a consumption experience more gratifying, thus helping customers experience pleasurable social and emotional benefits. Therefore: H 6 . Corporate image has a significant, positive effect on perceived value. 2.4. Loyalty Although ample evidence suggests significant, bivariate relation- ships between service evaluations and their outcomes such as word- of-month, referral, and retention, the links between these three service evaluation variables (i.e. quality, value, and satisfaction) and outcome measures are still unclear. Cronin et al.'s (2000) review reveals little uniformity concerning which of the three variables of service evaluation, or their combinations, directly affect outcome measures. The model structure appears highly dependent on the nature of the study and the time period of the paper. The extant studies are categorized into one of three model structure types (Cronin et al., 2000): a satisfaction model, a value model, or an indirect model. In satisfaction models,the primary and direct linkis from customer satisfaction to consumption outcome (consequences like behavioral intentions) measures (e.g. Ennew and Binks, 1999; Fornell et al., 1996; Hallowell, 1996). Value models feature perceived value, rather than satisfaction, as the primary and direct mechanism linking service perceptions to consumption outcomes (e.g. Chang and Wildt, 1994; Cronin et al., 1997). Indirect models posit that service quality influences customer loyalty only through value and satisfaction (e.g. Gotlieb et al.,1994; Patterson and Spreng, 1997; Roset and Pieters,1997). Partial examination of the simple bivariate links between any of the three constructs and loyalty may either mask or overstate the true relationship due to omitted variable bias. To address this issue, Cronin et al. (2000) propose a model in which all three variables (quality, value, and satisfaction) directly lead to loyalty simultaneously: H 7 . Customer satisfaction has a significant, positive effect on loyalty. H 8 . Perceived value has a significant, positive effect on loyalty. H 9 . Service quality has a significant, positive effect on loyalty. Corporate/brand image can also affect customer loyalty. Andreas- sen and Lindestad (1998) examine the role of corporate image in the formation of customer loyalty in the service sector and find both an indirect and direct influence of image on loyalty. Hart and Rosenber- ger (2004) replicate the Andreassen and Lindestad study in Australia. In their paper, Hart and Rosenberger report that image has a “marginally significant” direct effect on customer loyalty, but a substantial effect mediated by customer satisfaction. Therefore, a positive corporate image appears to stimulate loyalty for a company. While the indirect effects may be greater, a direct relationship between image and loyalty remains even in their presence: H 10 . Corporate image has a significant, positive effect on customer loyalty. 3. Methodology 3.1. Sampling and data collection ThesurveysampleisfromcustomersofoneofChina'slargest telecommunications providers. Due to research budget constraints, 1000 customers were randomly selected from the company's database, excluding customers contacted in the pilot test (see below). A questionnaire, cover letter, and postage paid return envelope were mailed to these 1000 individuals. Following Dillman's (1999) total design method, reminder postcards were sent out approximately two weeks after the initial mailing, followed by a second survey mailing approxi- mately one month later to those who had not returned questionnaires. In total, the mailings yielded 137 responses. There were 19 unusable questionnaires due to relatively high portions of missing data within these cases. Subsequent data analyses were conducted on the 118 usable questionnaires, representing an 11.8% response rate. While certainly lower than hoped for, this response rate is comparable to other studies conducted in China (cf. Lai et al., 2007; Zhao et al., 2007, 2006b). These low response rates are common in South-East Asia and are attributable to numerous structural and cultural factors (see Harzing, 2000; Zhao et al., 2006a). Table 1 shows key demographic characteristics of the customers. 3.2. Measures To enhance the content validity of the measures, a number of steps were taken. Wherever possible, existing measures were adopted. To assist with translation, the measures were first discussed with a panel of Table 1 Respondent profile Gender Income (RMB) Education Length of service Male 66.9% b1000 27.3% Middle school 7.6% b3 months 17.2% Female 30.5% 1000– 2000 15.1% High school 28.8% 3~ 6 months 6.0% Missing 2.5% 2000– 3000 33.0% Tertiary (3 years) 38.1% 6 ~ 12 months 8.6% 3000– 4000 9.5% College (4 years) 23.7% 1–3 years 36.2% N4000 15.1% Graduate 1.7% N3 years 32.0% 3F. Lai et al. / Journal of Business Research xxx (2008) xxx–xxx ARTICLE IN PRESS Please cite this article as: Lai F, et al., How quality, value, image, and satisfaction create loyalty at a Chinese telecom, J Bus Res (2008), doi:10.1016/j.jbusres.2008.10.015 17 managers (Zhao et al., 2006a). Managers were interviewed individually and asked to review the questionnaire and assess the suitability, readability, and ambiguity (see Dillman, 1999). The ques- tionnaire was iteratively revised based on feedback received from the managers. The revised questionnaire was then pilot tested. Questionnaires were mailed to 150 randomly selected customers and 20 useable responses were received. The questionnaire was further revised according to the preliminary analysis based on the pilot data. The final version of the questionnaire is discussed below. The five elements of Parasuraman et al. (1988) SERVQUAL: tangible (SQ1), responsiveness (SQ2), reliability (SQ3), assurance (SQ4), and empathy (SQ5), assess overall service quality. However, these items capture a customer's perception of service performance rather than the expectations-gap score approach (Babakus and Boller, 1992; Cronin and Taylor, 1992, 1994; Dabholkar et al., 2000). These items are on a 7-point Likert scale. Perceived value is an overall tradeoff of “get” versus “give-up” (Zeithaml, 1988). Two items measure value –“Overall, the service I receive from company X is valuable” (VA1) and “The service quality I receive from company X is worth my time, energy, and efforts” (VA2) – adapted from Choi et al. (2004). Both items are on a seven-point Likert scale, ranging from “Strongly Disagree” to “Strongly Agree.” Customer satisfaction is an overall global reaction to the consumption experience (Stank et al., 1999). The present study uses two items, “How satisfied are you with the services you receive from company X” (SA1) and “Overall, how satisfied are you with company X” (SA2). Both items are on a seven-point scale from “Very Dissatisfied” to “Very Satisfied.” Corporate image has four indicators. Three reflect the company's overall reputation, prestige, and brand reputation (Zeithaml, 1988; Selnes, 1993) –“ Please rate Company X's reputation” (I M1), “Please rate Company X's prestige” (IM2), and “Please rate the reputation of Company X's products and services” (IM3).Afourthitemcomparesreputationofthe target firm vis-à-vis the competitors (IM4; Selnes, 1993). All items are on a seven-point scale, with the first three items anchored with “Very Low” and “Very High” and the fourth item with “Much Worse” and “Much Better.” Customer loyalty is measured with two items, one assessing intention to repurchase and the other the willingness to recommend to others (Zeithaml et al., 1996). The items asked “How probable is it that you will switch to another mobile communication company in the future” (LO1) and “How probable is it that you will recommend company X's service to your friends and relatives” (LO2). In essence, these items capture behavioral intentions or continuance commit- ment. Both items are assessed on a seven-point scale ranging from “Very Unlikely” to “Very Likely.” 4. Data analysis and results 4.1. Measurement model Results of the measurement analysis are shown in Table 2. The χ 2 statistic (110.1, 80 df; p= 0.114) indicates the overall fit. Thus, the measurement model fits well enough to suggest adequate validity and warrant a closer look. Item reliability and composite reliability estimates both assess reliability. Factor loading estimates assess item reliability. Generally, items with loadings of 0.7 or more have adequate item reliability (Hair et al., 2006). As shown in Table 2, all standardized loading estimates are above the 0.70 threshold. The composite reliabilities for each dimension range from 0.84 to 0.94. Confirmatory factor analysis (CFA) establishes the construct validity of the proposed measurement model (Gerbing and Anderson, 1988; Hair et al., 2006). The indexes suggest a reasonable fit, as would be expected given the model χ 2 (NFI= 0.97; CFI= 0.99; RMSEA= 0.08). Overall, the results support the theoretical measurement model. Comparing the variance extracted (AVE) estimates for each construct with the squared inter-construct correlations between the relevant constructs gives an indication of discriminant validity (see Table 3). The results in Table 3 show that the AVE is greater than the squared correlation estimate for each construct pair, providing additional support of discriminant validity (Fornell and Larcker, 1981). Common method variance (CMV) is also assessed (Zhao et al., 2006a). A worse fit for a one-factor model with all items loading on a single construct suggests that CMV does not pose a serious threat. In this case, the one-factor test yields a χ 2 of 170.6 with 90 df (p b 0.001). Obviously, the one-factor fit is much worse than the proposed measurement model (difference in χ 2 =60.5, df =10, p b 0.0001). Overall, the results indicate that the study measures possess adequate fit, reliability, and validity. Thus, the following section presents the structural results. 4.2. Structural model testing Estimating a structural model corresponding to the hypothesized relationships assesses the research model (Fig. 1). The χ 2 goodness-of- fit statistic is 110.1 with 80 df. Estimates are shown in Fig. 2 along with other fit indexes, all indicating an acceptable fit. 4.3. Individual hypothesis testing Individual path estimates and the variance explained in the endogenous constructs (R 2 ) provide a test of the research hypotheses. As shown in Fig. 2, our model has high predictive power. For value, satisfaction, image, and loyalty, 71.4%, 87.3%, 62.5% and 37.7% of variance is explained, respectively. Table 2 Measurement model Item Standardized loading⁎ Composite reliability Quality SQ1 0.75 0.88 SQ2 0.72 SQ3 0.83 SQ4 0.87 SQ5 0.83 Value VA1 0.92 0.93 VA2 0.94 Satisfaction SA1 0.94 0.94 SA2 0.94 Image IM1 0.79 0.84 IM2 0.84 IM3 0.74 IM4 0.74 Loyalty LO1 0.90 0.89 LO2 0.89 Fit indexes: NFI=0.97; NNFI = 0.98; CFI=0.99 RMSEA=0.081 ⁎ Standardized factor loading, all are significant at 0.05 level. Table 3 Construct correlation Quality Image Value Satisfaction Loyalty Quality 0.885 † Image 0.790 ‡ 0.899 Value 0.782 0.814 0.928 Satisfaction 0.777 0.898 0.881 0.940 Loyalty 0.527 0.536 0.683 0.597 0.896 † Square root of average variance extracted (AVE) is shown on the diagonal and in bold; ‡ Correlation coefficients are shown in the off diagonal; all correlations are significant at the 0.05 level. 4 F. Lai et al. / Journal of Business Research xxx (2008) xxx–xxx ARTICLE IN PRESS Please cite this article as: Lai F, et al., How quality, value, image, and satisfaction create loyalty at a Chinese telecom, J Bus Res (2008), doi:10.1016/j.jbusres.2008.10.015 The research model proposes that service quality has a direct, positive relationship with perceived value, customer satisfaction, and corporate image. The path estimates in Fig. 2 show service quality is a significant predictor of both value (H 3 ; β = 0.370, p b 0.01) and corporate image (H 4 ; β =0.790, p b0.01). Service quality, however, does not have a direct link with customer satisfaction (H 1 ; β = 0.018, p N0.05), but does influence customer satisfaction indirectly, as both perceived value (H 2 ; β = 0.436, p b 0.01) and corporate image (H 5 ; β = 0.528, p b 0.01) are significant predictors of customer satisfaction. The model also proposes that corporate image influences perceived value directly (H 6 ). The data support this relationship (β= 0.522, p b 0.01). Four factors (quality, value, image, and satisfaction) are proposed to simultaneously influence customer loyalty. However, only the coefficients from satisfaction (H 7 ) and value (H 8 ) to loyalty are significant (β = 0.392 and 0.310; p b 0.01 and 0.05, respectively). The path coefficients from quality (H 9 ) and image (H 10 ) to loyalty are not significant (β= 0.107 and 0.009; p = 0.901 and 0.419, respectively). Thus, the data support H 7 and H 8 , but do not support H 9 and H 10 . The total effect of service quality on loyalty can be broken down into an indirect component, working through value, and a direct component, represented by H 9 . In this case, the indirect component is 0.42 (p b .001) and the direct component is 0.11 (ns). Therefore, the mediated relationships through value, account for practically all of the explained variance in loyalty attributable to service quality. 4.4. Loyalty drivers Satisfaction and value are the two significant, direct determinants of loyalty (β =0.392 and 0.310, respectively—see Fig. 2). A comparison of total effects indicates that value affects loyalty more strongly than does satisfaction (0.48 vs. 0.39). 5. Discussion The key objective of the study is to simultaneously examine the relationship among service quality, perceived value, customer satisfaction, corporate image, and customer loyalty. In addition, the study (1) tests the applicability of the model among Chinese consumers and (2) extends the loyalty model into the service sector. Overall, results generally support the model. Further, the model appears both applicable in China and in a service setting. 5.1. Satisfaction In this study, examining the mediating role of customer satisfaction between other service evaluations and customer loyalty is a key issue. Results reveal customer satisfaction has significant mediation effects for relationships from perceived value and cor- porate image to loyalty. In addition, while no direct link from ser- vice quality to satisfaction is present, satisfaction does mediate the quality → loyalty relationship through other variables. Thus, the majority of the effect of both quality and image on loyalty is indirect (see Table 4). The mediating power of satisfaction may be based on recency. Customers feeling highly satisfied with an exchange may over- emphasize the influence of service quality, value, and image on loyalty (Peterson and Wilson, 1992). These results are also consistent with empirical studies showing that satisfaction has a mediating effect on customer loyalty behavior (Caruana, 2002; Lu and Tang, 2001; Stank et al., 1999; Zins, 2001). Like other affect variables, satisfaction helps link more cognitively oriented constructs to behavioral outcomes. 5.2. Value Service quality and corporate image both have significant, direct effects on perceived value. Value then predicts both customer satisfaction and customer loyalty, directly. Thus, perceived value plays both an important mediating role between service quality and loyalty and corporate image and loyalty. Value actually has the Fig. 2. Structural model with parameter estimates. Table 4 Standardized effects Quality Image Value Satisfaction Image 0.790 a (0.790 b ,0 c ) ––– Value 0.782 (0.370, 0.412) 0.522 (0.522, 0) –– Satisfaction 0.777 (0.018, 0.759) 0.756 (0.528, 0.228) 0.436 (0.436, 0) – Loyalty 0.527 (0.107, 0.420) 0.319 (0.009, 0.310) 0.481 (0.310, 0.171) 0.392 (0.392, 0) a standardized total effect. b Standardized direct effects. c Standardized indirect effects. 5F. Lai et al. / Journal of Business Research xxx (2008) xxx–xxx ARTICLE IN PRESS Please cite this article as: Lai F, et al., How quality, value, image, and satisfaction create loyalty at a Chinese telecom, J Bus Res (2008), doi:10.1016/j.jbusres.2008.10.015 greatest total effect on customer loyalty (see Table 4). Other research suggests that perceived value only indirectly influences loyalty through satisfaction (Patterson and Spreng, 1997; Zins, 2001). Here, perceived value serves in an important mediating capacity but also directly influences loyalty. 5.3. Image Service quality explains 63% of the variance in corporate image. Higher service quality significantly enhances corporate image, which in turn improves customer satisfaction and perceived value. Image also has an indirect effect on satisfaction through value. While not showing a significant direct effect on loyalty, corporate image does have a significant mediated effect on loyalty (see Tables 3 and 4). Our finding is consistent with other research (Aydin and Ozer, 2005, see p. 921) suggesting that corporate image has no direct effect on mobile customers' loyalty. Similarly, Bloemer and Ruyter (1997) report that store satisfaction acted as mediator between store image and customer loyalty. Overall, while not directly linked to loyalty, corporate image plays a critical role in enhancing customer value and satisfaction. 6. Implications, limitations, and conclusions 6.1. Implications for practitioners The study should help marketing practitioners better understand the inter-relationship among service quality, customer satisfaction, perceived value, corporate image, and loyalty, as well as the mechanism for enhancing loyalty. While the context of the study is limited to a single Chinese mobile communications company, the results generally reinforce previous research involving goods and services in western cultures. First, service quality affects both satisfaction and loyalty indirectly with no direct influence in either case. In addition, service quality significantly affects value and image, two critical factors determining satisfaction and loyalty. Thus, service quality is a key building block to improving value and image, which determine service satisfaction and loyalty. Second, customer satisfaction and perceived value are direct determinants of customer loyalty. Obviously, service providers are concerned with these outcomes and this mobile communications company needs to build and monitor both satisfaction and value. In fact, value has a greater total effect on service loyalty than does any other construct. Third, and less obvious, is the role of corporate image in customer loyalty formation. Consistent with other studies, no direct link from image to loyalty is suggested. Nonetheless, in the current setting, image is a very efficient vehicle to improve customer value and satisfaction, and in turn, customer loyalty. 6.2. Implications for researchers In this study, image plays a role in creating value and building customer satisfaction, and in indirectly enhancing loyalty. Researchers should consider the role of image in service loyalty, particularly for technologically oriented products. Most importantly, the results indicate value may play a very important role in producing positive outcomes for service firms. In addition, the research context provides a contribution. Despite being the largest single market in the world, knowledge about Chinese consumers remains limited (Zhao et al., 2006a). While a full cross- cultural assessment is beyond the scope, the present study adds insight into one aspect of Chinese buyer behavior. Certainly building a knowledge base regarding the Chinese market is an increasingly important frontier for marketing academicians. 6.3. Limitations and future research directions Several limitations of the study should be noted. First, some important factors are not integrated into the model. For example, possible factors which may significantly influence customer loyalty include number portability between various cellular operators (Gerpott et al., 2001) and other switching barriers ( Kim et al., 2004; Jones et al., 2002). Second, one of the strengths of the study can also be considered a limitation. The model is tested in a Chinese telecommu- nications setting in which cultural and economic factors are embedded. Therefore, the findings may not be fully applicable in other settings. Third, the response rate, while consistent with other studies of Chinese consumers, is quite low. 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