Professional Documents
Culture Documents
LP2
LP2
(behavioral and attitudinal). In order to address the objectives of the study, the authors analyze survey data collected by a major retailer of educational and
entertainment items in India, which is an emerging market experiencing high growth. There is a need for better
understanding of consumer behavior in emerging economies to enable companies to shape their strategies better.
Data from India allows us to obtain this understanding of
consumers from an emerging economy, and provides
insights on aspects that are similar to those in markets
in developed economies (e.g., the United States). The data
set allows us to examine the attitudinal and behavioral
loyalty of members as well as non-members of the LP
that the retailer offers. Findings indicate that LP membership plays a mediating role between advertising effectiveness and attitudinal loyalty, but not between advertising
effectiveness and behavioral loyalty. The rest of the article
is organized as follows. The proposed model and the
hypotheses are in the next section. The following sections delineate the data collection method and results.
The article concludes with a discussion on implications
for managers and for theory.
Figure 1
Hypothesized Model
Notes: Model 1: Hypotheses H1 through H8; Model 2: Hypotheses H1 through H11 (Mediation Model.)
Brand Equity
Brand equity has been dened in several ways in extant
literature. Some studies dene brand equity as perceptual or psychological measures of the brand (Keller
1993; Park and Srinivasan 1994; Yoo and Donthu
2001). Brand equity is also the subjective appraisal of a
customers brand choice, and is the value added to a
Perceived Value
Perceived value is a customers overall evaluation of what
he or she receives compared with what he or she gives
up or pays (Bolton and Drew 1991), and is the denition that we adopt for perceived value. Perceived value is
a broad construct that encompasses perceptions of
quality, given price, and inputs versus output relative
to the competition (Johnson, Hermann, and Huber
2006). Extant literature also demonstrates that brand
equity is positively related to perceived value (Baldauf,
Cravens, and Binder 2003). We extend this nding to
our study and expect that higher brand equity leads to
a greater value obtained, and hypothesize that:
H3: A higher level of brand equity leads to greater
perceived value obtained.
Advertising Effectiveness
Advertising is a strategy, which helps in retaining loyal
customers (Agrawal 1996), as well as in attracting new
customers (e.g., Donius and von Gonten 1997). Most
advertising is repetitive whose objective is to reinforce
existing behavior by building brand salience and create
top-of-the-mind awareness (Ehrenberg 2000). There is a
long history of studying the effectiveness of advertising, in the advertising and marketing literature (e.g.,
Lawrence, Fournier, and Brunel 2013; Petty, Cacioppo,
and Schumann 1983). Advertising effectiveness may
routine purchase. One expects consumers to not purchase such products out of habit that is, it is less
likely that customers purchase the same items from
the store on each visit, or frequently purchase from
the same store. In such a purchase context, attitudinal
loyalty is likely to lead to behavioral loyalty. (In the
case of a routinely purchased product, it is more likely
that behavioral loyalty leads to attitudinal loyalty.) The
above theoretical reasoning, suggests the following
hypothesis:
H8: A higher level of attitudinal loyalty leads to
greater behavioral loyalty.
Loyalty Program
A loyalty program is an integrated system of marketing
actions that aims to reward and encourage customers
behavior and attitude through incentives (Kang,
Alejandro, and Groza 2015). LPs reward customers on
the basis of their purchase history, thus stimulating
loyal behavior (Yi and Jeon 2003). Both LPs and advertising are long term in orientation (Sharp and Sharp
1997). LPs focus on holding on to existing customers
and getting more from them. LPs emphasize on
increasing the average purchase frequency and rewards
customers for consolidating their purchases, and for
reducing the size of their brand repertoires (Sharp and
Sharp 1997). These programs lock customers in
through the equity the customer builds in the program
due to accumulation of points (Ehrenberg, Hammond,
and Goodhardt 1994).
Figure 1 consists of two models (Model 1 and Model
2), where Model 1 tests hypotheses H1 through H8,
and Model 2 tests hypotheses H1 through H11 (discussed subsequently). H9 through H11 consist of
hypotheses about loyalty programs, and the effect the
membership to such programs have on customers. The
latter model is applicable only to members of a loyalty
program of a retailer.
Research nds that a consumers prior disposition is
an important moderator of ad response (Cacioppo and
Petty 1985). If the subject is a loyal user of the brand or
is familiar with it, the positive response to exposure is
likely to be higher. Research also suggests that advertising is more effective in increasing the volume purchased
by loyal buyers but less effective in winning new buyers
(Raj 1982). Consumers who have high loyalty increase
brand purchase when advertising effectiveness for that
METHOD
Data Collection
A major retailer of educational (e.g., books, stationery) and
entertainment items (e.g., educational toys, music, computer accessories) in India conducts a study to investigate
the role of a customer loyalty program in the context of
customer loyalty. A leading marketing research agency
collects the data from fourteen store outlets across nine
cities throughout the country. For collecting the required
data, research associates approach customers leaving the
stores after purchasing at least one item from the store.
This research follows the purposive sampling methodology in approaching customers, and one in every sixteen
customers agree to participate in the survey. The research
associates read the survey in the English language to the
participants and note their responses. All those who are
approached to participate in the survey are uent in
English (read, write, and speak). Every person who is
approached is asked to indicate his/her age and the gender
of the person is noted. Each survey (for those who agree to
participate in the survey) lasts for approximately twenty-
Behavioral Loyalty
Dick and Basu (1994)
Perceived Value
Bolton and Drew (1991) (Based on the definition
provided by the authors)
Advertising Effectiveness (Eisend, Plagemann, and
Sollwedel 2014; Fortin and Dholakia 2005)
Brand Equity
Aaker (1996) (Based on the authors
conceptualization of brand equity)
Product Quality
Simonson (1999)
Service Quality
Parasuraman, Zeithaml, and Berry (1988) (Based on
SERVQUAL)
Constructs
Items
(Continued )
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Table 1
Measurement Items
* If a friend or a colleague were to ask you to recommend a shopping store, what is the likelihood that you would
recommend the store?
* How would you rate the overall quality of the loyalty program of the store?
Please rate the loyalty program on the following attributes
* Attractiveness of the reward points of the program to motivate you to buy more
* Ease of redemption of reward points earned
* Adequacy of schemes and offers for loyalty members
* Ability to communicate promotion offers, event information through emails and short messaging services (SMS)
* Ability to communicate new releases through emails
* Complaint resolution for loyalty program members
* Efforts to make you feel special because of being a loyalty program member
Items
Notes: All items were measured on a ve-point Likert scale, where 1 = Poor, 2 = Fair, 3 = Good, 4 = Very Good and 5 = Excellent.
Attitudinal Loyalty
Reichheld (1996)
Loyalty Program
Rothenberger, Grewal, and Iyer (2008)
Constructs
Table 1
(Continued)
MEASUREMENT MODELS
The item loadings of the constructs in the model are statistically signicant (see Table 3), and are well above the
recommended benchmark of 0.7, indicating item
Table 2A
Sample Characteristics: Gender and Membership Status
Membership Status
Member
Gender
144
99
243
(df): 0.496
101
71
172
(1); not significant
Total
245
170
415
Table 2B
Sample Characteristics: Age and Membership Status
Membership Status
RESULTS
The authors divide the overall sample into two subsamples: S1 (n1 = 172) consists of customers who are not
members of the loyalty program, and S2 (n2 = 243) are
customers who are members of the loyalty program.
Demographic characteristics across members and non-
Male
Female
Total
Chi Square
Non-Member
Member
Age
Non-Member
18-35 Years
134
106
> 35 Years
109
66
Total
243
172
Chi Square (df): 0.112 (1); not significant
Total
240
175
415
STRUCTURAL MODELS
After conrming the validity and the reliability of the
measurement model, this study tests the conceptual
models (Figure 1). Table 6 reports the path coefcients
and the associated R2. The results provide several interesting ndings. For customers who are not members of
the loyalty program (Model 1, S1), this study nds
support for all hypotheses except H6 and H7. This nding demonstrates that advertising effectiveness has no
signicant impact on either attitudinal loyalty or behavioral loyalty for customers that are not members of the
loyalty program. R2 for Brand Equity, Perceived Value,
Behavioral Loyalty, and Attitudinal Loyalty are 22.4 percent, 11.5 percent, 58.3 percent, and 10.5 percent,
respectively.
For customers who are members of the loyalty program (Model 1, S2), study results provide support for all
hypotheses except H6. R2 for Brand Equity, Perceived
Value, Behavioral Loyalty, and Attitudinal Loyalty for
the loyalty members are 31.7 percent, 16.8 percent,
58.2 percent, and 11.8 percent, respectively. This nding demonstrates that advertising effectiveness has a signicant impact on attitudinal loyalty but not on
behavioral loyalty for customers that are members of the
loyalty program. [Note that the effect of Advertising
Effectiveness on Attitudinal Loyalty is signicant (H7),
when tests do not include the mediator (i.e., Loyalty
Program) in the analysis (Model 2, S2)].
Therefore, the difference between the members and
non-members of the store loyalty program is that advertising effectiveness has a signicant impact on attitudinal
Service Quality
ServQ1
ServQ2
ServQ3
ServQ4
ServQ5
ServQ6
Product Quality
PRQ1
PRQ2
PRQ3
PRQ4
PRQ5
PRQ6
Brand Equity
BrandEq1
BrandEq2
BrandEq3
BrandEq4
BrandEq5
BrandEq6
BrandEq7
BrandEq8
Advertising Effectiveness
Adv1
Adv2
Adv3
Adv4
Adv5
Adv6
Construct and
Indicators
3.2
3.2
3.2
3.3
3.1
3.2
3.1
3.6
3.5
3.6
3.6
3.6
3.5
3.6
4.0
4.1
3.9
4.1
3.9
4.0
4.0
4.0
4.0
3.8
3.8
3.9
3.9
3.8
3.8
3.8
0.80
0.85
0.82
0.76
0.82
0.74
0.78
0.73
0.73
0.69
0.77
0.73
0.78
0.69
0.54
0.52
0.59
0.51
0.61
0.54
0.48
0.57
0.50
0.73
0.68
0.74
0.70
0.80
0.69
0.76
Model 1 (S1)
0.83
0.90
0.90
0.88
0.90
0.90
0.74
0.79
0.70
0.79
0.81
0.75
0.83
0.75
0.87
0.91
0.92
0.94
0.89
0.82
0.89
0.92
0.88
0.89
0.87
0.89
Std.
AVE Mean Dev Load
CR
7.85
8.52
7.05
7.26
6.79
6.97
9.74
11.56
6.83
14.29
18.64
9.81
13.89
8.60
28.01
41.59
60.83
72.44
40.90
17.90
24.77
32.05
24.72
25.73
26.26
26.14
t-val
Std.
Dev
3.7
3.8
3.9
3.8
3.7
3.7
3.6
3.9
3.9
3.9
3.8
3.8
3.8
3.8
4.1
4.1
4.0
4.1
4.1
4.1
4.1
4.1
4.0
3.8
3.7
3.9
3.8
3.9
3.8
3.8
0.81
0.86
0.80
0.78
0.87
0.73
0.80
0.73
0.74
0.70
0.75
0.75
0.71
0.76
0.63
0.61
0.69
0.61
0.66
0.65
0.62
0.61
0.60
0.89
0.88
0.87
0.88
0.94
0.85
0.89
Model 1 (S2)
AVE Mean
CR
0.81
0.90
0.88
0.87
0.88
0.85
0.82
0.79
0.80
0.77
0.77
0.79
0.79
0.79
0.83
0.89
0.87
0.92
0.91
0.82
0.85
0.84
0.83
0.86
0.80
0.85
Load
16.96
21.85
21.24
16.27
17.95
14.55
28.36
24.50
27.11
21.23
23.07
16.74
28.32
23.37
25.35
32.48
35.19
79.32
64.88
23.54
42.13
37.05
36.63
46.10
28.18
38.82
t-val
3.7
3.8
3.9
3.8
3.7
3.7
3.6
3.9
3.9
3.9
3.8
3.8
3.8
3.8
4.1
4.1
4.0
4.1
4.1
4.1
4.1
4.1
4.0
3.8
3.7
3.9
3.8
3.9
3.8
3.7
0.81
0.86
0.80
0.78
0.87
0.73
0.80
0.73
0.74
0.70
0.75
0.75
0.71
0.76
0.63
0.61
0.69
0.61
0.66
0.65
0.62
0.61
0.60
0.89
0.88
0.87
0.88
0.94
0.85
0.89
Model 2 (S2)
21.26
25.62
24.92
26.28
30.75
22.73
28.40
24.53
26.72
21.06
23.17
17.05
28.15
23.64
25.32
32.11
35.48
78.42
66.35
22.90
40.75
37.92
36.41
45.04
28.40
38.37
t-val
(Continued )
0.82
0.88
0.87
0.88
0.89
0.87
0.82
0.79
0.80
0.77
0.77
0.76
0.80
0.79
0.83
0.89
0.87
0.92
0.91
0.82
0.85
0.84
0.83
0.86
0.80
0.85
Std.
AVE Mean Dev Load
CR
Table 3
Properties of the Measurement Model (CFA) (Scale Items with Convergent Validity Statistics)
4.1
4.1
3.7
t-val
CR
Std.
Dev
4.25
4.30
4.06
0.73
0.71
0.78
Model 1 (S2)
AVE Mean
0.67
0.91 (0.90) 0.84
0.69 0.94 110.68
0.77 0.84 27.00
Model 1 (S1)
Std.
AVE Mean Dev Load
t-val
0.91 102.97
0.92 50.26
Load
4.2
4.3
4.1
3.7
3.9
3.7
3.8
3.7
3.7
3.6
3.8
3.6
0.73
0.71
0.78
0.86
0.82
0.81
0.79
0.84
0.91
0.92
0.87
0.94
Model 2 (S2)
t-val
0.80
0.88
0.85
0.87
0.80
0.81
0.79
0.79
16.58
32.82
29.46
28.43
16.12
16.92
17.98
19.11
0.93 107.49
0.90 49.30
Std.
AVE Mean Dev Load
CR
Notes: The measurement items/questions refer to Table 1. AVE = Average Variance Explained CR = Composite Reliability Perceived Value and Attitudinal Loyalty are not included as
these constructs are measured via single items. Loyalty Program is not included in Model 1. S1 = Customers who are not members of the loyalty program S2 = Customers who are
members of the loyalty program
Behavioral Loyalty
BehavLoy1
BehavLoy2
Loyalty Program
LoyalProg1
LoyalProg2
LoyalProg3
LoyalProg4
LoyalProg5
LoyalProg6
LoyalProg7
LoyalProg8
Construct and
Indicators
CR
Table 3
(Continued)
Figure 2
Mediation Analysis
Loyalty Program
Attitudinal
Loyalty
Advertising
Effectiveness
= .14; (t=1.92; p > .05) (Model 3)
Sobel Test: z = 2.77; p < .05
Table 4A
Discriminant Validity Statistics
Model 1, S1
Advertising
Effectiveness
Attitudinal Loyalty
Behavioral Loyalty
Brand Equity
Product Quality
Service Quality
Perceived Value
Advertising
Effectiveness
Att.
Loyalty
Beh.
Loyalty
Brand
Equity
Product
Quality
Service
Quality
Perceived
Value
1.00
0.78
0.57
0.37
0.23
0.31
0.89
0.55
0.46
0.33
0.36
0.77
0.42
0.39
0.34
0.90
0.49
0.32
0.89
0.28
1.00
0.88
0.14
0.10
0.20
0.18
0.26
0.13
Table 4B
Discriminant Validity Statistics
Model 1, S2
Advertising
Effectiveness
Attitudinal Loyalty
Behavioral Loyalty
Brand Equity
Product Quality
Service Quality
Perceived Value
Advertising
Effectiveness
Att.
Loyalty
Beh.
Loyalty
Brand
Equity
Product
Quality
Service
Quality
Perceived
Value
1.00
0.75
0.53
0.33
0.35
0.30
0.92
0.54
0.40
0.29
0.35
0.79
0.36
0.54
0.41
0.87
0.37
0.34
0.84
0.35
1.00
0.87
0.20
0.19
0.13
0.20
0.09
0.13
Model 2, S2
Advertising
Effectiveness
Attitudinal Loyalty
Behavioral Loyalty
Brand Equity
Loyalty Program
Product Quality
Service Quality
Perceived Value
Att.
Loyalty
Beh.
Loyalty
Brand
Equity
Loyalty
Program
Product
Quality
Service
Quality
Perceived
Value
1.00
0.75
0.53
0.24
0.33
0.35
0.30
0.92
0.54
0.21
0.40
0.29
0.35
0.79
0.32
0.36
0.54
0.41
0.82
0.24
0.31
0.26
0.87
0.37
0.34
0.84
0.34
1.00
0.87
0.20
0.18
0.13
0.19
0.20
0.09
0.13
Table 5
Test of Invariance (Members vs. Non-Members): AVE and R2
R2
AVE
Advertising
Att. Loyalty
Beh. Loyalty
Brand Equity
Product
Quality
Service
Personnel
Value
Diff
(Members vs.
Non-Members)
t-Value
(Members vs.
Non-Members)
p-Value
(Members vs.
Non-Members)
Diff
(Members vs.
Non-Members)
t-Value
(Members vs.
Non-Members)
p-Value
(Members vs.
Non-Members)
0.032
0.000
0.040
0.023
0.036
0.325
0.881
1.125
0.328
0.929
0.746
0.379
0.262
0.743
0.354
0.013
0.001
0.093
0.220
0.013
1.036
0.826
0.990
0.301
0.089
2.315
0.022
0.000
0.288
0.774
0.053
0.766
0.445
Note: Results for Welch-Satterthwait test of differences in AVE and R for Model 1 (S2 vs. S1).
Managerial Implications
This study has several implications for managers. First,
the role of the Loyalty Program in mediating the
Effects
Model 1, S1
(Support for
Hypotheses: Y/N)
Model 1, S2
(Support for
Hypotheses:
Y/N)
Model 2, S2
(Support for
Hypotheses:
Y/N)
(22.4%)
0.24** (Y)
0.30***(Y)
(11.5%)
(31.7%)
0.47***(Y)
0.19**(Y)
(16.8%)
(31.7%)
0.47***(Y)
0.19**(Y)
(16.8%)
Brand Equity
0.34***(Y)
(58.3%)
0.41***(Y)
(58.2%)
0.41***(Y)
(58.1%)
H3(+)
Perceived Value
Advertising
Effectiveness
Attitudinal Loyalty
Loyalty Program
0.14***(Y)
0.01n.s. (N)
0.27***(Y)
0.03n.s. (N)
0.13**(Y)
0.03n.s. (N)
H4(+)
H6(+)
0.71***(Y)
(10.5%)
0.71***(Y)
(11.8%)
0.71***(Y)
0.00n.s. (N)
(14.0%)
H8(+)
H10(+)
Perceived Value
Advertising
Effectiveness
Loyalty Program
0.30***(Y)
0.10n.s. (N)
0.28***(Y)
0.17**(Y)
0.24***(Y)
0.14n.s. (N)
H5(+)
H7 (+)
0.15*(Y)
(4.0%)
H11(+)
Advertising
Effectiveness
0.19**(Y)
H9(+)
Originally Hypothesized
Relationships
Causes
Brand Equity
Service Quality
Product Quality
Perceived
Value
Behavioral
Loyalty
Attitudinal
Loyalty
Loyalty
Program
H1(+)
H2(+)
Notes: * p < 0.05; ** p < 0.01; *** p < 0.001; n.s. = Not Signicant. Empty cells indicate that those variables are not included in the model tested.
R2 values are presented as percentages in parentheses.
Y = Support obtained for hypothesis. N = Support not obtained for hypothesis.+ = The hypothesized direction of the relationships that are
tested. Model 2 tests a mediation model. S1 = Customers who are not members of the stores loyalty program. S2 = Customers who are members of
the stores loyalty program.
Theoretical Implications
The present study contributes to the marketing literature
in the following ways: First, this study helps in understanding the nding that advertising effectiveness affects
attitudinal loyalty. Mediation analyses investigates the
underlying process by which advertising effectiveness
inuences attitudinal loyalty, and nds that the loyalty
program plays an important role in governing the relationship between advertising effectiveness and attitudinal loyalty. The ndings indicate partial mediation, which means
that the loyalty program accounts for some, but not all, of
the variance explaining the relationship between advertising effectiveness and attitudinal loyalty. These ndings
imply that there is not only a signicant relationship
between the loyalty program and attitudinal loyalty but
also some direct relationship between advertising effectiveness and attitudinal loyalty. Second, this study investigates the impact of advertising effectiveness on
behavioral loyalty. These ndings suggest that advertising
effectiveness does not affect behavioral loyalty. Perhaps,
positive perception of a brands advertising (i.e., higher
advertising effectiveness), is not sufcient to induce purchase behavior. Third, this study measures the effect of
advertisings effectiveness on both loyalty program members and non-members. These ndings show that advertising effectiveness affects loyalty of only LP members,
probably due to long-term association with the brand.
REFERENCES
Aaker, David (1996), Measuring Brand Equity across
Products and Markets, California Management Review,
38 (3), 102120.
Agarwal, Manoj K., and Vithala R. Rao (1996), An Empirical
Comparison of Consumer-Based Measures of Brand
Equity, Marketing Letters, 7 (3), 237247.
Agrawal, Deepak (1996), Effect of Brand Loyalty on
Advertising and Trade Promotions: A Game Theoretic
Analysis with Empirical Evidence, Marketing Science, 15
(1), 86108.
Agustin, Clara, and Jagdip Singh (2005), Curvilinear Effects
of Consumer Loyalty Determinants in Relational
Exchanges, Journal of Marketing Research, 42 (1), 96108.
Anderson, James C., and David W. Gerbing (1988),
Structural Equation Modeling in Practice: A Review
and Recommended Two-Step Approach, Psychological
Bulletin 103, (3), 41123.
Arnold, Stephen J., Tae H. Oum, Bohumir Pazderka, and
Douglas W. Snetsinger (1987), Advertising Quality in
Sales Response Models, Journal of Marketing Research,
24 (1), 106113.
Bagozzi, Richard P. (1991), Further Thoughts on the Validity
of Measures of Elation, Gladness, and Joy, Journal of
Personality and Social Psychology, 61 (1), 98104.
Baldauf, Arthur, Karen S. Cravens, and Gudrun Binder (2003),
Performance Consequences of Brand Equity Management:
Evidence from Organization in the Value Chain, Journal of
Product & Brand Management, 12 (4), 220236.
Baumgarth, Carsten, and Lars Binckebanck (2011), Sales
Force Impact on B-To-B Brand Equity: Conceptual
Framework and Empirical Test, Journal of Product &
Brand Management, 20 (6), 487498.
Baumol, William J., and Edward A. Ide (1956), Variety in
Retailing, Management Science, 3 (1), 93101.
Berry, Leonard L. (1999), Discovering the Soul of Service, New
York: Free Press.
Bolton, Ruth N., and James H. Drew (1991), A Longitudinal
Analysis of the Impact of Service Changes on Customer
Attitudes, Journal of Marketing, 55 (January), 19.
Bolton, Ruth N., Peter K. Kannan, and Matthew D. Bramlett
(2000), Implications of Loyalty Program Membership
and Service Experiences for Customer Retention and
Value, Journal of the Academy of Marketing Science, 28
(1), 95108.
Borle, Sharad, Peter Boatwright, Joseph B. Kadane, Joseph C.
Nunes, and Galit Shmueli (2005), The Effect of Product
Assortment Changes on Customer Retention, Marketing
Science, 24 (4), 616622.
Brady, Michael K., and J. Joseph Cronin, Jr. (2001),
Customer Orientation: Effects on Customer Service
Perceptions and Outcome Behaviors, Journal of Service
Research, 3 (3), 241251.
Broniarczyk, Susan M., Wayne D. Hoyer, and Leigh McAlister
(1998), Consumers Perceptions of the Assortment
Offered in a Grocery Category: The Impact of Item
Reduction, Journal of Marketing Research, 35 (2), 166176.
Cacioppo, John T., and Richard E. Petty (1985), Central and
Peripheral Routes to Persuasion: The Role of Message
Copyright of Journal of Marketing Theory & Practice is the property of Taylor & Francis Ltd
and its content may not be copied or emailed to multiple sites or posted to a listserv without
the copyright holder's express written permission. However, users may print, download, or
email articles for individual use.