Member loyalty and WOM in co-operative and

mutual enterprises
Tim Mazzarol
Department of Marketing, University of Western Australia Business School, Perth, Australia, and
Geoffrey Soutar and Elena Mamouni Limnios
Department of Marketing, University of Western Australia, Perth, Australia

Abstract
Purpose – The purpose of this paper is to present findings from a large-scale survey of members of co-operative and mutual enterprises (CMEs) that
examines the factors influencing members’ intentions to remain loyal to the enterprise and to provide word of mouth (WOM).
Design/methodology/approach – A model was suggested and tested to examine the interrelationships between constructs measuring emotional,
functional and financial value, affective and continuance commitment, intention to remain loyal to a CME and WOM communication. A large sample
was drawn from a range of co-operative and mutual enterprises, and the suggested model was estimated using a partial least squares approach.
Findings – Significant relationships were found between all constructs. However, emotional value and affective commitment were found to have particularly
strong relationships. Emotional value had a strong influence on both affective and continuance commitment, while affective commitment had a strong
influence on loyalty and WOM.
Originality/value – This paper provides empirical support for suggestions about the factors that influence member loyalty within CMEs and the
relative importance of non-financial motivations. It also provides a strong foundation upon which directors and executive managers of CMEs can
build more effective member marketing and communications strategies.
Keywords Word-of-mouth, Co-operative enterprise, Member loyalty, Mutual enterprise
Paper type Research paper

Introduction
Co-operative and mutual enterprises (CMEs) are crucial parts of
many markets, servicing an estimated 1.2 billion members
worldwide (ICA-Euricse, 2018). Despite their importance, there
has been surprisingly little research into these business entities,
which led to the present study. Although there is no universally
accepted definition, a CME was defined here as follows:
A member-owned organisation with five or more active members and one or
more economic or social purposes. Governance is democratic and based on
sharing, democracy and delegation for the benefit of all members.
The roles played by perceived value, commitment and word-of-
mouth (WOM) are well recognised within the mainstream services
marketing literature (Curth et al., 2014; Johnson et al., 2008; Jones
et al., 2010; Keiningham et al., 2017). However, there has been
little application of such services-based marketing models to
CMEs. Traditionally, the emphasis in CME research, particularly
in agricultural co-operatives, has been on economic factors (e.g.
pricing) and efficiency (e.g. performance) (Sexton and Iskow,
1988; Fulton and Giannakas, 2001), as well as ownership rights,
governance, supply chain management issues, trust and return on
investment (Nilsson, 2001; Fulton and Giannakas, 2007;
Österberg and Nilsson, 2009; Grashuis and Su, 2018).
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Previous research into CME members’ loyalty has identified the
importance of affective commitment (Palmer et al., 2000; Byrne
and McCarthy, 2005; Jiménez et al., 2010; Bijman and Verhees,
2011; Chechin et al., 2012; Jussila, Byrne and Tuominen, 2012b;
Jussila et al., 2012a, 2012b; Jones et al., 2016). However, few
studies have examined this relationship using a structural equation
modelling (SEM) approach and, even then, only with relatively
small samples (Palmer et al., 2000) or from single organisations
(Puusa et al., 2017). Furthermore, WOM’s role, although
acknowledged in previous CME research (Byrne and McCarthy,
2014; Talonen et al., 2016), has not been examined in depth.
Despite this prior research, many CMEs directors and executive
managers suggest members’ loyalty is motivated primarily by their
role as a patron who supplies or buys from the business and by their
role as an investor because members may have ownership rights
that accumulate share capital (Nilsson, 2001). This is particularly
common in producer co-operatives such as those found in
agricultural or fishing industries (Mamouni Limnios et al., 2018).
The motivation for this research was, therefore, the need to
address a gap in the CME literature and concerns about CMEs’
ability to maintain member loyalty. This is important because
CME directors and senior executives need to know if “soft”
factors, such as emotional value and affective commitment,
influence member loyalty more than “hard” factors such as
functional value. Furthermore, by examining these relationships
using a large sample of members from a number of CMEs, a

Journal of Services Marketing

Received 8 July 2018
33/3 (2019) 303–315 Revised 19 December 2018
© Emerald Publishing Limited [ISSN 0887-6045] 22 March 2019
[DOI 10.1108/JSM-07-2018-0195] Accepted 24 March 2019

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 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
compelling case can be made for CME directors and managers to
more fully embrace services marketing theory and practice.
The paper begins with an overview of the CME as a business
model within the services sector. It then examines the customer
loyalty literature and how it relates to CMEs, for which
member loyalty and commitment are key strategic objectives.
The nature and importance of WOM is also discussed before a
model is suggested. The methodology and analysis used and
the findings obtained from estimating this model are then
outlined before some conclusions, application to practice and
implications for future research are discussed.
Co-operatives and mutual enterprises
CMEs are a large, but often ignored, segment of the wider
business community. In 2017, there were around 2.6 million
CMEs operating across the world with a combined annual
turnover of more than US$2.2 trn that provided employment for
an estimated 250 million people (ICA-Euricse, 2018). CMEs
operate across a wide range of industries and can be broadly
classified into “consumer-owned”, “producer-owned” and
“consumer-producer-owned” enterprises (Birchall, 2011, 2014).
The “producer-owned” CMEs commonly include agribusiness
co-operatives (e.g. grains, dairy, meats, fruits and fishing), but can
include retailer-owned wholesale co-operatives (e.g. hardware,
supermarkets, grocers and pharmacies). Shared services co-
operatives (e.g. taxis, builders and artists) are also common.
Within the “consumer-owned” category, there are a mixture of co-
operatives (e.g. housing, retailing, pharmacies, utilities, child care
and schools), as well as mutual enterprises (e.g. insurance, credit
societies, friendly societies, building societies, life insurance, health
insurance and motoring services).
Although related, CMEs are different organisations,
primarily in relation to their history and governance. The
International Co-operative Alliance (ICA) (the peak global
body for co-operatives) suggests the following:
A co-operative is an autonomous association of persons united voluntarily to
meet their common economic, social and cultural needs and aspirations through
a jointly-owned and democratically-controlled enterprise (ICA, 2018).
Co-operative enterprises trace their modern history to the
Rochdale Society of Equitable Pioneers that was founded in 1844
(Wilson et al., 2012). Although this was not the first co-
operative, its historical importance is the legacy of its founding
principles, laid out in its constitution, that have (subject to only
minor changes) become globally accepted as a blueprint for
modern co-operatives (Rochdale Society, 1877; Nelson et al.,
2016). These seven principles are as follows (ICA, 2015):

voluntary and open membership;

democratic member control;

member economic participation;

autonomy and independence;

education, training and information;

co-operation among co-operatives; and

concern for the community.
It has been suggested that the first four principles are the most
important in defining a co-operative enterprise (Birchall, 2014).
It should also be noted that these principles are not always
adhered to by all co-operatives. For example, some (e.g. New
Generation Co-operatives) have closed membership, while the
last three principles are not considered mandatory.
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In contrast, mutual enterprises trace their origins as far back as
the Middle Ages and to the emergence in the eighteenth and
nineteenth centuries of Friendly Societies in the UK such as the
Ancient Order of Foresters, Independent Order of Rechabites, United
Ancient Order of Druids and the Independent Order of Oddfellows,
which were established to provide financial, insurance and medical
services (Lyons, 2001). The mutual enterprise sector is large and
has a particular strength in financial services, insurance, banking
and health services. There is no universally accepted definition of a
mutual enterprise, but the European Union suggests the following:
Voluntary groups of persons (natural or legal) whose purpose is primarily to
meet the needs of their members rather than achieve a return on investment,
which operate according to the principles of solidarity between members,
and where members participate in the governance of the business (Grijpstra
et al., 2011 p. 14).
While CMEs have differences, particularly in terms of
democratic ownership (e.g. one-member-one-vote in co-
operatives) and adherence to the seven co-operative principles,
the two types of enterprise are sufficiently similar to be
collectively described as CMEs. This acronym first appeared in
a paper published by Co-operative Futures (2000) and has
been adopted within wider academic and industry circles
(Ridley-Duff, 2012, 2015). It offers a useful terminology that
unites these two related, but not identical, types of businesses
(Yeo, 2002). As noted by Ridley-Duff (2015, p. 46), a
distinguishing characteristic of CMEs is that they “are defined
by a commitment to (or innovative systems for advancing)
trade through democratic/inclusive enterprises.”
Differences between the co-operative and mutual
enterprise business model and other types of
enterprise
CME is a unique business model that is different from investor
owned firms (IOFs), not-for-profit social enterprises (NFPSEs)
and state-owned enterprises (SOEs). Although CMEs can be
found in a wide range of different industry sectors and have strong
social and economic purposes, they differ from other types of
business in some respects. These relate to purpose, ownership,
governance and financing (i.e. how share capital is distributed).
While an IOF is typically established for economic purposes and
has an ownership and governance structure based on a model of
one-share-one-vote, the CME (particularly the co-operative) has
both an economic and social purpose, and a governance model in
which active members have one-member-one-vote democracy
(Bacchiega and de Fraja, 2004; Apps, 2016). Share capital in IOFs
is also commonly distributed through investment into the equity of
the business. Depending on the profitability of the business, an
IOF will usually issue dividends to repay owner-investors for their
commercial risk. By comparison, CMEs may be distributing (able
to issue dividends) or non-distributing (not able to issue dividends).
Share capital in CMEs is normally owned mutually and the
acquisition of shares and any distribution of profits is based on
active patronage by members who either sells to or buys from the
enterprise (Roy, 1976; Staatz, 1987a, 1987b; Chaddad and Cook,
2004; Birchall, 2011; Royer, 2014).
CMEs differ from SOEs primarily in terms of their ownership.
For example, SOEs are owned by government and are created to
meet specific public good objectives. Their ownership can be solely
government owned or have a public-private partnership structure.
 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
However, their performance metrics are typically oriented towards
the successful completion of their mission to satisfy goals laid down
by government policy (Perry and Rainey, 1988). Finally, while
NFPSEs and CMEs often overlap (i.e. many not-for-profit CMEs
are also charitable enterprises), their ownership structures and how
they treat share capital (whether or not it is distributed) are usually
different (Ridley-Duff, 2012; Ridley-Duff and Bull, 2015).
It is possible that member loyalty is influenced by similar
factors in CMEs and IOFs, especially “hard” factors such as
financial and functional value or continuance commitment.
However, prior customer loyalty research has also had a strong
focus on “soft” factors and motivators (Dick and Basu, 1994;
Foster and Cadogan, 2000; McMullan, 2005; Ranganathan
et al., 2013; Tripathi, 2017). By comparison, CME member
loyalty research has focused on the “hard” factors with an
emphasis on financial value (e.g. prices and investment returns)
or social capital building though member participation in
annual general meetings (Osuntogun, 1972; Luecal, 1995; Li,
Friis and Nilsson, 2016). Attention has also been given to the
importance of trust in enhancing member loyalty (Arcas-Lario
and Hernández-Espallardo, 2003; Österberg and Nilsson,
2009). The roles played by emotional value and affective
commitment have only recently been identified (Jussila et al.,
2012b; Talonen et al., 2016; Puusa et al., 2017).
Creating value for members through a service
experience
An important aspect of any business model is its ability to create
value for customers (Morris et al., 2005; Chesbrough, 2007;
Zott and Amit, 2007, 2010; Teece, 2010; Zott et al., 2011). In a
CME, this is associated with the creation of value for members
or what can be described as a member value proposition (MVP).
To achieve a viable and compelling MVP, the value a CME
offers its members should be difficult for members to acquire
from other types of business (Nguyen, 2006). Furthermore, the
CME’s overall performance is effectively measured by whether
it achieves the goals set out under its purpose and whether
members feel their economic and social well-being are better
off by remaining with the enterprise (Sexton and Iskow, 1988).
The distinguishing characteristic of the CME business
model is that members are simultaneously owners, patrons
and shareholders (Mamouni Limnios et al., 2018). This is
particularly the case for co-operatives. Even though a CME
may produce tangible goods, from a member’s perspective,
it is essentially a service business. This has been recognised
as an important element in how value is created within
CMEs (i.e. through member patronage and value in use)
(Talonen et al., 2016). In this respect, it conforms to the
service dominant logic model (Vargo and Lusch, 2004,
2008; Lusch and Vargo, 2006, 2011; Lusch, 2011).
Value for CME members can be generated in many ways,
depending on the purposes for which the enterprise was created.
As noted, a distinguishing characteristic of CMEs is that they have
both economic and social goals and have been identified as
“hybrid” and “dual purpose” organisations bridging the gap
between IOFs and NFPSEs (Levi and Davis, 2008; Novkovic,
2008). The creation of perceived value among CME members
begins with the underlying purpose, for which the enterprise was
created (Sexton and Iskow, 1988). The purpose that underlies a
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CME’s raison d’être is its overall mission and strategic goals that
have both economic and social focuses (MacPherson, 2012).
Furthermore, it has been argued through mutual incentives theory
that shared goals, values and a common sense of belonging to a
community with similar purposes is an essential ingredient in the
formation of a CME (Birchall and Simmons, 2004).
Purpose is, therefore, a key prerequisite to member engagement
(Shah, 1996) and the development of a shared identity and values
(Nelson et al., 2016). In many CMEs, a loss of focus on the overall
purpose has led to demutualisation (Battilani and Schröter, 2012).
This can occur over time as an enterprise widens its geographic
coverage, increases the diversity of its membership base or resolves
the economic or social problems that triggered its creation (Staaz,
1987a, 1987b; LeVay, 1983; Cook, 1995; Allemand et al., 2016;
Reboud et al., 2016).
Within the marketing literature, there is a recognition that
value is something perceived from a customer’s perspective
(Zeithaml, 1988; Woodruff et al., 1993; Hansen et al.,
Samuelsen and Silseth, 2008; Whittaker et al., 2007).
Customer value is a multidimensional construct that includes
financial, functional, social and emotional aspects (Sweeney
and Soutar, 2001; Sanchez-Fernandez and Iniesta-Bonillo,
2009; Boksberger and Melsen, 2011), and this holds true for
CME members (Chechin, et al., 2012; Talonen, et al., 2016).
Financial or economic value and functional value are trade-offs
between the quality received for the cost or sacrifice expended
(Whittaker, et al., 2007). The role of financial or economic value
within CMEs has been understood in a similar manner (Jussila,
et al., 2012b; Talonen, et al., 2016). Functional value is the
economic utility members gain from using a CME’s services
(Nguyen, 2006). Functional value is key influence on consumer
choice (Sheth et al., 1991) and is determined by a CME’s ability to
represent local needs and be responsive to member needs
(Talonen, et al., 2016). Emotional value comes from an offering’s
ability to arouse feelings that trigger affective states (LeBlanc and
Nguyen, 2001) and is a key factor in generating an affective
commitment (Nguyen, 2006). Members who feel strongly that
they receive emotional value from their CME generally retain their
patronage (Talonen, et al., 2016).
Member commitment and loyalty
CME member commitment is strategically important because of
member’s roles as owners, patrons, investors and members of a
community of common purpose for which the enterprise was
founded. Any reduction in member commitment is likely to have
negative impacts on a CME’s sustainability (Bijman and Verhees,
2011). Member loyalty, measured by member’s ongoing
patronage, is an outcome of member commitment (Fulton and
Giannakas, 2001; Kalogeras et al., 2007). Member commitment
and loyalty is complex and can be influenced by a range of factors,
including the age of the member, which can impact on producer
co-operatives as the members reach retirement (Fulton and
Adamowicz, 1993). A key test of members’ commitment is their
willingness to remain a patron even when prices and/or services are
not as competitive with those offered by IOFs (Fulton, 1999;
Bijman and Verhees, 2011).
Kanter (1968) suggested member commitment in social
organisations is driven by multiple factors. The first is a
commitment to remain a member and participate (continuance
 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
commitment). The second is a willingness to voluntarily adhere to
the organisation’s norms and rules of the organisation (control
commitment). The third is a willingness to maintain group solidarity
and social relations (cohesion commitment). As social organisations
these factors are likely to be at play in CMEs.
However, member commitment can be best understood
within Meyer and Allen’s (1991) organisational commitment
model, which suggests commitment has three distinct elements
(desire (affective commitment), need (continuance commitment)
and obligation (normative commitment)). These factors are
widely accepted within marketing as key drivers of customer
commitment (Keiningham et al., 2017). However, affective
and continuance commitment have been identified as the more
important drivers of loyalty (Fullerton, 2003).
As with most service firms, affective commitment, which is an
emotional bond or attachment or a sense of belonging and
identification with an organisation (Johnson et al., 2008), is a
key driver of loyalty. It manifests itself in a CME when
members support the CME and encourage others to do so
(Byrne and McCarthy, 2005). Similar to customers in
conventional service firms, members with a high sense of
affective commitment are likely to remain loyal to their CMEs
because they share a strong sense of identification with its
purpose; moreover, they feel the CME is congruent with their
own goals and objectives (Foreman and Whetten, 2002;
Jiménez, et al., 2010). Member ownership and democratic
governance, as well as the focus of many CMEs on
communicating with members and engendering a sense of
common purpose, have also been noted as factors likely to
enhance affective commitment (Jussila et al., 2012b).
Although affective commitment is important it is only one of
many factors driving member loyalty. Continuance commitment,
which is the individual’s recognition that the cost of leaving the
organisation are greater than the benefits they get from
remaining, might also be important (Allen and Meyer, 1990a,
1990b). There has been debate over whether continuance
commitment is a unidimensional or multidimensional construct
(McGee and Ford, 1987). Meyer et al. (1990) suggested it may
have two components (imperative commitment (there are no
alternatives) and calculative commitment (an assessment of the
sacrifices that leaving will entail)). For CME members,
imperative commitment occurs when they cannot find viable
alternatives to the services they get from their mutual or co-
operative; perhaps, because it is operating without competition.
This is generally unlikely in most open market economies,
although it can be found in some highly regulated markets. In
contrast, CMEs that have competitors may find members
experience calculative commitment if they demonstrate the costs
of switching to an alternative provider outweigh any benefits
(Jiménez et al., 2010). In a study of a large retail co-operative in
Finland, member loyalty was found to be primarily driven by
affective and continuance commitment with normative commitment
having a negative influence (Puusa et al., 2017). Furthermore,
while Keiningham et al. (2015) have suggested that a five-
component scale to measure customer commitment and
repurchase intentions should include normative commitment,
they found that it “does not appear to be strongly associated
with loyalty across contexts,” which may be because of norms
being “situation specific.”
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Word of mouth
WOM communication has been defined as “informal
communication between private parties concerning evaluations of
goods and services” (Anderson, 1998, p. 6). It is recognised as a
highly effective form of marketing communication, which has
credibility and is particularly valuable in the promotion of services
(Mazzarol et al., 2007; Sweeney et al., 2012). Loyal customers who
provide positive WOM have a “ripple effect” as they attract new
patrons and create value for the organisation (Gremler and Brown,
1999).
Research suggests that customer commitment and
satisfaction leads to positive WOM (de Matos and Rossi,
2008). Interpersonal communication between customers and
employees can also stimulate positive WOM because it fosters
trust, demonstrates care, builds rapport and enhances
familiarity (Gremler et al., 2001). This is also true in CMEs.
When members are satisfied with the services that they receive,
they are more likely to remain loyal and give positive WOM
(Bloomquist, 1983; Simmons et al., 2015). Other research
suggests better educated members are more likely to give
WOM (LeBlanc and Nguyen, 2001).
A conceptual model
The prior research outlined in the literature review suggested a
number of hypotheses, namely,
H1. A CME member’s affective commitment is positively
influenced by their perception that their membership
offers good financial value (value for money).
H2. A CME member’s continuance commitment is
positively influenced by their perception that their
membership offers good financial value (value for
money).
H3. A CME member’s affective commitment is positively
influenced by their perception that their membership
offers good emotional value.
H4. A CME member’s continuance commitment is
positively influenced by their perception that their
membership offers good emotional value.
H5. A CME member’s affective commitment is positively
influenced by their perception that their membership
offers good functional value.
H6. A CME member’s continuance commitment is
positively influenced by their perception that their
membership offers good functional value.
H7. A CME member’s affective commitment influences
their willingness to give positive WOM.
H8. A CME member’s continuance commitment
influences their willingness to give positive WOM.
H9. A CME member’s loyalty (intention to remain a
member) is positively influenced by their affective
commitment.
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H10. A CME member’s loyalty (intention to remain a Table I The study’s constructs
member) is positively influenced by their continuance
Construct Sample item # items Source
commitment.
Functional value The CME can be counted 3 Sweeney and
H11. A CME member’s loyalty (intention to remain a member) on to perform well Soutar (2001)
influences their willingness to give positive WOM. Emotional value I feel good about my 4 Sweeney and
relationship with the Soutar (2001)
These hypotheses led to the model examined here, which can be
CME
seen in Figure 1. This model assumes that the factors that influence
Financial value I am sure the CME is 6 Sweeney and
customer loyalty within service organisations also apply to members
worth the money it costs Soutar (2001)
within CMEs. As can be seen, the model suggests intention to
me
remain a member and provide WOM are influenced by financial,
Affective I am proud to be 6 Allen and Meyer
emotional and functional value. However, these influences are
commitment associated with the CME (1990a, 1990b)
mediated by affective and continuance commitment.
Continuance I would give up a lot if I 3 Allen and Meyer
The scales used to measure the model’s constructs are shown in
commitment left the CME (1990a, 1990b)
Table I. In each case, a Likert-type scale that ranged from strongly
Word of Mouth I frequently mention this 7 Harrison-Walker
disagree (1) to strongly agree (5) was used. The functional,
CME to others (2001) and Teo
emotional and financial value scales were based on the Sweeney
and Soutar (2012)
and Soutar (2001) PERVAL scale. While their Functional value
Loyalty I plan to remain a 3 Söderlund (2002)
measure had six items, a pilot survey (discussed below) suggested
(intention to member of the CME in
three items were appropriate in this case. Similarly, their emotional
remain a the future
value measure had six items; however, four were found to be
member)
appropriate. The financial value measure (which they termed a
functional (price) dimension) included their six items.
The affective and continuance commitment were adapted pilot study was undertaken with a large co-operative in the
from Allen and Meyer (1990a, 1990b). The original affective agricultural sector so as to assess the validity and reliability of
commitment scale included 12 items, while continuance the scales. Then, the questionnaire was revised and some items
commitment was measured through 5 items. Here, the pilot were removed as noted previously. In each case and following
study suggested six items could be used to measure affective
Thomas et al. (2001) suggestion, the correlation between the
commitment, and three items could be used to measure
scores obtained from the original set of items and the reduced
continuance commitment. These items related to calculative
set of items was computed. As all of these exceeded 0.90, it was
commitment rather than imperative commitment because the
clear the reduction in the number of items did not change the
CME members who were surveyed were free to leave their co-
nature of the construct being measured.
operative or mutual enterprise should they wish to do so.
Nine large CMEs participated in the main data collection
The WOM and Loyalty measures were adapted from
phase with data being collected from members of four
Harrison-Walker (2001), Teo and Soutar (2012) and Söderlund
producer-owned agribusiness co-operatives, i.e. a consumer-
(2002), and all of the original items were retained here. Normative
owned retail co-operative, two consumer-owned shared
commitment was not included because prior research has
services co-operatives and a motoring services mutual
suggested affective and continuance commitment were likely to be
enterprise. An online survey was undertaken to obtain data
more influential factors (Fullerton, 2003) and that normative
from members of these CMEs that operate across Australia.
commitment was less influential (Keiningham et al. (2015).
The questionnaire was distributed to members through their
CMEs’ databases with a covering note explaining the purpose
Methodology and sample of the study and seeking their participation. All respondents
The study began with the development of a questionnaire that participated on the understanding that their participation was
included the items used to measure the constructs of interest. A not compulsory and that they could not be identified.
Figure 1 A conceptual model of member loyalty in CMEs

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Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios Volume 33 · Number 3 · 2019 · 303–315

A final sample of 2,749 responses was obtained. Most Table II The path model’s statistics
respondents (63 per cent) were male with ages ranging from
Std Composite AVE VIF
20s to over 70 years. A wide range of educational backgrounds
Factor Mean dev reliability* score** ***
were also found with 25 per cent with high school certificates;
34 per cent with vocational trade certificates or diplomas; 24 Financial value (Value for
per cent with undergraduate degrees; and the remainder with Money) 3.85 0.61 0.93 0.67 2.70
postgraduate university qualifications. Most (78 per cent) Emotional value 4.03 0.61 0.92 0.79 4.64
respondents could be best described as retail customers, while Functional value 4.06 0.67 0.93 0.82 3.88
the remaining respondents were business owners with a Affective commitment 4.03 0.56 0.87 0.69 3.83
supplier or buyer relationship. Almost half (47 per cent) had Continuance commitment 3.75 0.76 0.84 0.63 2.03
been a member of their CME for more than 20 years, while 25 Word of Mouth 3.64 0.74 0.93 0.66 2.53
per cent had been members for 10-20 years and 14 per cent had Loyalty (Intention to Stay) 4.30 0.58 0.95 0.87 2.89
been members between 5 and 10 years. This suggests most Notes: *A measure of the internal consistency of a scale (>0.70 is
were loyal, long-term members. acceptable); **average variance extracted (AVE) scores assess convergent
Despite the reported loyalty to their CME, most (87 per cent) validity (>0.50 is acceptable); ***variance inflation factor (VIF) assesses
had never attended an annual general meeting (AGM) and only 4 multicollinearity (<5 is acceptable)
per cent attended AGMs regularly, while less than 2 per cent
attended every AGM. Furthermore, less than 3 per cent had ever
standardised root mean squared residual was 0.08 and the
been an office bearer (e.g. director or board member). Overall, the
standardised mean absolute residual was 0.07, both of which also
sample was representative of the target population of members
suggest the model is a good fit to the data (Kock, 2017). The
from such enterprises as confirmed by participating CMEs.
estimated paths coefficients, which can be seen in Table II,
supported the hypothesised model because all of the suggested
Data analysis and findings paths were significant. Emotional value had the greatest impact on
Initial data analysis included the computation of descriptive both affective commitment (b = 0.46) and continuance
statistics. The model was then estimated using a partial least commitment (b = 0.35), while affective commitment had the
squares (PLS) approach within the WarpPLS software package greatest impact on loyalty (b = 0.55) and WOM (b = 0.43).
(version 6) (Kock, 2017). The choice of PLS over covariance- However, all the three value dimensions impacted significantly on
based approaches was determined by the relatively large number of both forms of commitment, and both forms of commitment
indicator items and the model’s complexity (Chin and Newsted, impacted significantly on WOM and loyalty. Moreover, loyalty
1999). PLS analysis has become an established approach in recent impacted significantly on WOM.
years (Garson, 2014), especially because of the availability of Furthermore, it was evident that the endogenous constructs in
appropriate software programs (Chin, 1988; Hult et al., 2006; the model were very well explained because the R2 statistics ranged
Henseler et al., 2009; Hair et al., 2014; Kock, 2017). from 0.43 (continuous commitment) to 0.72 (affective
As noted earlier, five-point rating scales were used to measure commitment). Furthermore, 54 per cent of the variation in WOM
the constructs of interest; this is consistent with other research was explained and 60 per cent of the variation in member loyalty
using these constructs (Srivastava and Dhar, 2016). Table II (intention to remain a member) was explained (Table III).
shows the means and standard deviations for each of the As the model suggested the two forms of commitment and
constructs, as well as their composite reliabilities, average variance loyalty were mediators, this issue was also examined. Hair et al.
extracted (AVE) scores and variance inflation factor (VIF) (2014) have suggested using the variance accounted for (VAF)
statistics. Intention to stay with the CME had a mean score of approach to assess this issue. After determining indirect effects are
4.30, suggesting that most members were loyal. The other mean
Table III The estimated path coefficients
scores were all above 3.00, with reasonable standard deviations,
suggesting that while most respondents were positive about their Hypothesis Path b Coefficient*
CME; however, there was some variation in views that made it H1 Financial Value ! Affective Commitment 0.11
worthwhile to estimate the suggested model. H2 Financial Value ! Continuance 0.15
As can also be seen in Table II, reliability scores ranged from Commitment
0.84 to 0.95, while AVE scores ranged from 0.63 to 0.87, H3 Emotional Value ! Affective Commitment 0.46
suggesting that the scales were all internally consistent and had H4 Emotional Value ! Continuance 0.35
convergent validity (Fornell and Larcker, 1981). Some minor Commitment
multicollinearity was found because the VIF scores ranged from H5 Functional Value ! Affective Commitment 0.35
2.02 to 4.61. Ideally, VIF scores should be less than 3.30 H6 Functional Value ! Continuance 0.22
(Cenfetelli and Bassellier, 2009), but VIF scores of less than 5.0 are Commitment
generally seen as acceptable (Kock, 2017), which was the case here. H9 Affective Commitment ! Loyalty 0.54
As all of the constructs had good measurement properties, all H10 Continuance Commitment ! Loyalty 0.31
were retained and the model shown in Figure 1 was estimated. H7 Affective Commitment ! WOM 0.43
The final model was a good fit to the data, as Tenenhaus’s H8 Continuance Commitment ! WOM 0.31
Goodness of Fit index was 0.66, suggesting that there was a H11 Loyalty ! WOM 0.10
“large” effect, which was not surprising as the average R2 for the
Note: *All paths are significant at least at the 0.001 level
model’s endogenous constructs was 0.57. Furthermore, the

308
 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
significant, the VAF score, which is proportion of the total effect of
a construct because indirect effects (i.e. the mediated effects), can
be computed to determine the nature of the mediation. If the VAF
is greater than 80 (i.e. more than 80 per cent of the total effect is
attributable to indirect relationships) then full mediation should be
assumed. If the VAF is less than 20 (i.e. less than 20 per cent of the
total effect is attributable to indirect relationships), then no
mediation should be assumed. If the VAF score lies between,
partial mediation should be assumed. The results in this case can
be seen in Table IV. As can be seen in the table, the indirect effects
of the two commitment constructs on WOM (through loyalty)
were not significant. However, the indirect effects from the three
value constructs to WOM were all significant, and the VAF scores
ranged from 35 to 52, suggesting partial mediation could be
assumed in each case. The mediating effects on loyalty were also
examined and the results obtained can also be seen in Table IV. In
this case, the direct path from financial value to loyalty was not
significant, but the indirect effects were, suggesting full mediation.
VAF scores were computed for the other value construct. In this
case, the impacts that financial and emotional value had on WOM
were partially mediated. Thus, the commitment constructs also
played significant roles in these relationships.
It can also be seen from Table IV that the impact emotional
value had on both loyalty and WOM was significant. This should
not be surprising because Jussila et al. (2015) suggested “emotional
value can be understood from one stand point as a deeper and
long-lasting mental state, as in a psychological feeling of
ownership” (Talonen et al., 2016, p. 147). Members with strong
emotional value towards their CMEs will be more likely to remain
loyal but also more likely to give positive WOM.
Discussion
This study provides further empirical support to the
importance of “soft” or intangible motivators for loyalty within
service market environments rather than “hard” ones (e.g.
price, service quality). It is acknowledged that these findings
reinforce what is already understood within the mainstream
services marketing literature. However, they offer valuable
evidence to researchers and practitioners within the CME
sector that it is “soft” rather than “hard” factors that are likely
to be the key drivers of member loyalty. Our findings can offer
some insights into both the common drivers of loyalty in service
Table IV Mediation effects
Indirect Total VAF
Value and Commitment on WOM
Financial Value on WOM 0.05 0.13 39
Emotional Value on WOM 0.16 0.45 35
Functional value on WOM 0.11 0.21 52
Affective Commitment on WOM ns
Continuous Commitment on WOM ns
Value on Loyalty
Financial Value on Loyalty*
Emotional Value on Loyalty 0.17 0.43 40
Functional value on Loyalty 0.12 0.33 30
Note: *The direct path from financial value to loyalty was not significant,
but the indirect effects were significant, suggesting full mediation
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Volume 33 · Number 3 · 2019 · 303–315
environments and those that are unique to CMEs. We discuss
these in the following sub-sections.
Common drivers of loyalty in service environments – co-
operative and mutual enterprises versus other service firms
As noted, our study provides further evidence of the
importance of affective commitment and continuance commitment
as factors that influence loyalty in service relationships as has
already been recognised in service marketing (Fullerton, 2003;
Johnson et al., 2008; Keiningham et al., 2015, 2017). However,
the study offers empirical findings from a large sample drawn
from a cross-section of different types of CMEs. The findings
support prior research that has highlighted the importance of
these factors as key drivers of CME member loyalty (Jiménez
et al., 2010; Jussila et al., 2012b; Pesamma et al., 2013; Byrne
and McCarthy, 2014; Talonen et al., 2016; Puusa et al., 2017).
While the analysis suggests both these types of commitment
enhance member loyalty, their relative influences suggest the need
for a CME to not only provide quality services at competitive
prices but to also focus on communicating to members its purpose
and values (Nelson et al., 2016). In other words, members’ loyalty
is driven by a pragmatism born of necessity and an idealism born
out of a sense of common purpose and collective engagement.
This may be an appeal that both CME and non-CME enterprises
might make; however, an advantage that CMEs have is their
mutual ownership business model. This allows the CME to appeal
to its members not just as buyer/supplier patrons, with competitive
pricing and investment returns, but also as owners, with
democratic governance rights to a business they own in mutual. In
addition, the CME can appeal to the purpose for which it was
founded and that binds its members together in a common goal
(Mamouni Limnios et al., 2018).
Thus, the CME has a potential opportunity to engage in what
Webb (1996) referred to as “relationships marketing”, which
focuses on the values and purpose of the enterprise with its dual
economic and social objectives (Novkovic, 2008; Levi and Davis,
2008). This view is reinforced by the role emotional value plays in
the model. While financial and functional value had significant
influences on affective and continuance commitment and on WOM
and loyalty, emotional value had bigger influences on affective
commitment, WOM and loyalty. The importance of emotional value
as a motivator for engagement with co-operatives has been
previously noted (LeBlanc and Nguyen, 2001; Nguyen, 2006;
Talonen et al., 2016). Emotional value’s role is known in service
marketing (Whittaker et al., 2007); however, to our knowledge, the
impacts that emotional, financial and functional value and affective
and continuance commitment have on CME member loyalty have
not been previously tested in this manner. The relative strength of
emotional value suggests CME directors and managers should not
focus entirely on promoting value for money or service quality.
Such things must be of a quality or standard that is competitive
with alternatives. However, member’s engagement with their
CME in terms of their feelings and commitment to the
organisation are of most importance.
Unique drivers of loyalty in co-operative and mutual
enterprises
The idea that CMEs should be proactive in their promotion of
their mutual status, economic and social purposes and inherent
democracy has been suggested previously (Webb, 1996; Battilani
 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
and Schröter, 2012). In particular, there have been calls for CMEs
to recognise that they have economic and social goals that focus on
enhancing members’ well-being (Levi, 2006; Levi and Davis,
2008; Novkovic, 2008, 2014; Puusa et al., 2016). The
demutualisation of many CMEs has been attributed to a lack of
adherence to the seven co-operative principles or to a loss of focus
on their need to maintain a clear purpose (MacPherson, 2012).
There is recognition that CMEs must be efficient businesses or
what Spear (2000) describes as productive efficiency (e.g. being able
to offer competitive prices and quality service). However, it also
needs to have social efficiency or an ability to offer members value in
a social capital sense, with a purpose and ethos that provides
members with an entity they feel has goals and values congruent
with their own (Birchall and Simmons, 2004; Jussila et al., 2012a;
Sacchetti and Tortia, 2016; Nelson et al., 2016). The
communication of member-ownership and the inherent
democracy of most CMEs can be a key element in building this
affective attachment and helping maintain member loyalty
(Pesamma et al., 2013; Gupta, 2014).
For IOFs that operate in the services environment, this ability to
promote their social and economic purpose has been highlighted
in terms of them promoting their corporate social responsibility
(CSR) (Jones, et al., 2010; Aal et al., 2016). It has also been
identified as a future direction for research into customer loyalty
within service firms (Keiningham et al., 2015). There is some
evidence that CSR strategies undertaken by financial service firms
can have a positive impact on employees’ affective commitment;
however, CSR is a complex multidimensional construct that
requires consideration of various stakeholders (Al-Wugayan,
2017). Despite its potential to engender loyalty within IOF service
firms, CSR has been criticised for not providing genuine social or
environmental benefits but just seeking to maintain the status-quo
(Archel et al., 2011; Banerjee, 2003; Fleming and Jones, 2013). In
response, it has been suggested that CMEs can provide a much
more compelling CSR argument via what has been termed as
“Co-operative Social Responsibility,” which is consistent with
their economic and social purpose, and can be measured and
assessed by social audits (Marino, 2015).
The generation of Word of Mouth
The findings also suggest that perceived value and affective and
continuance commitment influence the generation of WOM among
CME members. This relationship between these factors and
positive WOM within service environments has been acknowledged
in the marketing services literature (Harrison-Walker, 2001;
Fullerton, 2003; Keiningham et al., 2015, 2017). However, as
noted in the literature review, few studies have examined WOM in
CME contexts, even though its importance as an outcome of
member commitment to their CMEs has been noted (Verhees et al.,
2015; Talonen et al., 2016). CME directors and managers must
recognise that members who have strong affective and continuance
commitment to their CME will not only remain loyal but will also
give positive WOM that helps attract new members and reinforce
existing members’ loyalties. For CMEs that do not have large
marketing budgets, positive WOM from existing members may well
provide a steady flow of new members (Palmer et al., 2000).
Implications for management
For CME directors and managers, this study highlights the
importance of not focusing entirely on offering competitive pricing
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Volume 33 · Number 3 · 2019 · 303–315
and excellent service to members. While these are important and
necessary foundations for member loyalty, the most important
drivers are members’ sense of emotional value and affective
commitment. Fostering these attributes among members requires
CMEs to offer a MVP that includes not only the benefits of quality
service and competitive prices but also a well-considered common
purpose and values set that resonate with members.
Members must also trust their relationship with their CME.
As a construct, trust is a process involving two parties (e.g. a
member and a CME), in which both sides assume the other will
consider their interests and not exploit them (Morrow et al.,
2004). Trust is an essential foundation of social capital that, in
turn, is a key element in the successful operation of CMEs and
without which they may be placed at risk (Birchall, 2011).
Trust fosters emotional value and affective commitment and a
strong sense of community (Morrow et al., 2004).
CME managers and directors need to make use of corporate
communication and education strategies that help members
understand they are not just patrons of a business but also
owners, investors and members of a wider community for
which the co-operative or mutual was created. Member
education of the CME’s purpose and the promotion of active
voice democracy (particularly in co-operatives in which one-
member-one-vote exists), and mutual ownership principles can
help foster trust, identity, emotional value, affective
commitment and ultimately loyalty (Jussila et al., 2012b).
By fostering a strong sense of common purpose (community
of purpose) among members, directors and managers can
enhance members’ identification with their CMEs and their
overall missions, thereby enhancing trust and engagement
(McClintock-Stoel and Sternquist, 2004). Members’
identification with their CME’s vision, mission and values and
their willingness to trust the enterprise require it to be seen as
acting in members’ best interests and consistently delivering on
its MVP (Fulton and Giannakas, 2001).
Conclusions
This study was consistent with some prior suggestions about the
factors that are likely to enhance CME member loyalty. It makes a
significant contribution to this literature by providing an empirical
assessment of these factors and, in doing so, fills a gap within the
CME research field. It highlights the importance of non-financial
and non-functional attributes because they were key factors in
motivating member loyalty. Affective commitment has the biggest
impact on member loyalty, with continuance commitment also
playing a significant role. While financial and functional values
have a significant influence on affective and continuance
commitment and on WOM and loyalty, emotional value has a
bigger influence on affective commitment, WOM and loyalty.
The study provides empirical support for prior qualitative
findings that suggested CME members should be viewed not
only as patrons and investors (Nilsson, 2001) but also as
owners and members of a community of common purpose
(Mamouni Limnios, et al., 2018).
The study is not without limitations. It was undertaken in
only one country and future research should draw on data from
other countries in which historical, jurisdictional and cultural
attributes might differ. Future research should also examine the
roles that trust, social capital and values play in enhancing
 Member loyalty and WOM
Tim Mazzarol, Geoffrey Soutar and Elena Mamouni Limnios
member identity, engagement and loyalty. Future research
should also make a direct comparison between CME members
and IOF customers so as to identify similarities or differences
between these two groups in relation to the factors that
motivate their loyalty and WOM. In future research, this model
could be expanded to include additional components such as
those proposed by Keiningham et al. (2015) who offered a five-
component scale to measure customer commitment.
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Corresponding author
Tim Mazzarol can be contacted at: tim.mazzarol@uwa.edu.
au