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Brand equity, relationship quality,
relationship value, and customer
loyalty: Evidence from the
telecommunications servicesChing-Fu Chen
a& Odonchimeg Myagmarsuren
b
aDepartment of Transportation and Communication Management
Science, National Cheng Kung University, 1 University Road,
Tainan City, 70101, Taiwan, Republic of ChinabInstitute of International Management, National Cheng Kung
University, 1 University Road, Tainan City, 70101, Taiwan, Republic
of China
Available online: 06 Sep 2011
To cite this article:Ching-Fu Chen & Odonchimeg Myagmarsuren (2011): Brand equity, relationship
quality, relationship value, and customer loyalty: Evidence from the telecommunications services,
Total Quality Management & Business Excellence, DOI:10.1080/14783363.2011.593872
To link to this article: http://dx.doi.org/10.1080/14783363.2011.593872
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Brand equity, relationship quality, relationship value, and customer
loyalty: Evidence from the telecommunications servicesChing-Fu Chena and Odonchimeg Myagmarsurenb
aDepartment of Transportation and Communication Management Science, National Cheng Kung
University, 1 University Road, Tainan City 70101, Taiwan, Republic of China; bInstitute ofInternational Management, National Cheng Kung University, 1 University Road, Tainan City70101, Taiwan, Republic of China
The paper aims to examine customer loyalty and explore the interrelationships betweencustomer equity variables, namely brand image, company image, relationship quality andrelationship value, and customerloyalty. The studyconceptualisesan integratedcustomer
loyalty model and applies it to Taiwans telecommunications services industry in thebusiness-to-customer environment. The structural equation modelling technique isemployed to empirically test the proposed hypotheses using a sample of 236 customerscollected by a questionnaire survey. The findings indicate that brand and companyimages significantly influence relationship quality, and relationship quality has asignificant influence on relationship value. However, customer loyalty is not affectedby either dimensions of images and relationship quality directly; rather images andrelationship quality affect customer loyalty mediated by relationship value. This studyalso reveals that relationship marketing variables (i.e. relationship quality andrelationship value) act as mediators in the link between brand equity (i.e. brand imageand company image) and customer loyalty towards telecommunications services.
Keywords:brand equity; relationship quality; relationship value; customer loyalty;
telecommunications service
Introduction
Bothscholarsand practitioners accept that collaborative buyer seller relationships represent
a source of competitive advantage (Barry & Terry, 2008; Ulaga & Eggert, 2006b). Customer
relationship management (CRM) is a core organisational process that concentrates on estab-
lishing, maintaining, and enhancing long-term associations with customers (Jayachandran,
Sharma, Kaufman, & Raman, 2005; Roos, Friman, & Edvardsson, 2009; Verhoef, 2003).
Past studies, by and large, support that CRM leads to greater customer loyalty (Izquierdo,
Cillan, & Gutierrez, 2005; Rigby, Reichheld, & Schefter, 2002) and business performance(Javalgi, Martin, & Young, 2006; Kamakura, Mittal, Rosa, & Mazzon, 2002).
The concept of customer equity provides a way to effectively measure the benefits of
investments in CRM (Richards & Jones, 2008). Customer equity is viewed as the dis-
counted lifetime value of a firms customer base and is driven by three factors: brand
equity, value equity, and relationship equity (Rust, Lemon, & Zeithaml, 2004; Rust,
Zeithaml, & Lemon, 2000).Brand equity is defined as the differential effect of brand knowl-
edge on consumer response to the marketing of a brand (Keller, 1993). It can be driven by
brand awareness, brand image, and corporate ethics (Johnson, Herrmann, & Huber, 2006).
ISSN 1478-3363 print/ISSN 1478-3371 online
# 2011 Taylor & Francis
DOI: 10.1080/14783363.2011.593872
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Corresponding author. Email: [email protected]
Total Quality Management
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Value equity is the customers evaluation of what is given and what is received so as to
determine this aspect of equity (Vogel, Evanschitzky, & Ramaseshan, 2008). In other
words, value equity is to measure the customer-perceived value of the relationship
(Ulaga & Eggert, 2006a).Relationship equity represents the customers view of the strength
(or quality) of the relationship between customer and company (Sublaban & Aranha, 2008).
The potential relationship equity drivers include trust (Bitner, 1995; Schurr & Ozanne,1985), satisfaction (Hewett, Money, & Sharma, 2002; Macintosh, 2007), and commitment
(Anderson & Weitz, 1992; Morgan & Hunt, 1994).
A common goal of CRM and customer equity concerns understanding customers and
realising the greater value from customers over the long term. Following this line of reason-
ing, customer equity leads to customer loyalty which develops long-term and profitable
relationships in marketing discipline (Leone et al., 2006; Raimondo, Miceli, & Costabile,
2008). Moreover, customer equity drivers have been found to be key antecedents of custo-
mer loyalty (Johnson et al., 2006). Hence, previous research largely focuses on the directs
effects of customer equity on customer loyalty, but overlooks the interrelationships between
various customer equity drivers. A closer look into the interrelationships between customerequity drivers and, subsequently, their impacts on customer loyalty can enhance our under-
standing about CRM practices. To build successful relationships with customers, for
instance, it is essential for managers to find out how customer equity drivers affect each
other and how they influence customer loyalty. Managers who have successful relationships
with selected customers tend to reap the benefits of higher profitability through reduced
marketing and administrative costs and better sales growth compared with supplier firms
that use a transactional approach to serving customers (Low & Johnston, 2006).
To address these intriguing but unanswered questions, the present study empirically
examines a comprehensive model that includes customer equity and relationship variables
at the same time and shows how these variables are interrelated and to produce strong cus-tomer loyalty in business-to-customer (B2C) service context. To do so, the study hypoth-
esises that firms brand equity (conceptualised as brand image and company image) have
positive effects on customer loyalty through the mediation effects of relationship equity
(conceptualised as relationship quality) and value equity (conceptualised as relationship
value). The research setting of this study is the telecommunication services industry in
Taiwan. The rapid development of mobile telecommunication services industry encoun-
ters fierce competition between companies. Taiwans mobile carriers have a full awareness
of the importance of customer-oriented business strategy as a condition for continuing
their competitive edge and maintaining a stable profit level and, indeed, for their very
survival. When the number of subscribers reaches its saturation point, creating and secur-
ing new customers is not only difficult but also costly in terms of marketing practices.
Hence, it becomes an industry-wide belief that the best core relationship marketing strat-
egy for the future is to retain existing customers by enhancing their customer loyalty.
The rest of the paper is structured as follows. Conceptual development based on litera-
ture review is presented in the second section. Next section describes the research method,
followed by empirical results. Finally, the implications of this study and suggestions for
future research are discussed in the last section.
Conceptual background and research hypotheses
Relationship marketing highlights the establishment, development, and maintenance oflong-term exchanges. Such relationships are thought to be more profitable than short-
term relationships as a result of exchange efficiencies. This is particularly true of
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businesscustomer relationships (Myhal, Kang, & Murphy, 2008). Further relationship
marketing is based on generating a foundation of shared interests, in which firms and cus-
tomers commit to each other. Firms strive to use interactions with customers to generate
commitment, which includes trust, customer desire to maintain a valued relationship, and
readiness to rely on an exchange partner. Some marketing scholars advocate firms formally
defining and managing the value of their customers. The concept of customer equity isuseful in that regard (Leone et al., 2006). Customer equity is concerned with identifying
the value of a customer to the selling firm. Measuring customer equity addresses two impor-
tant concerns of todays marketers: customer relationships and financial accountability. In
calculating customer equity, individual customer lifetime values (CLVs) are determined for
each customer. Ultimately, customer equity relates to a return on a marketing measure. CLV
is the net present value of a single customers value, and customer equity is the discounted
sum of all customers lifetime values (Rust et al., 2004).
Rust et al. (2000) have proposed three components and key drivers of customer equity:
value equity, brand equity, and relationship equity.Value equityis the customers apprai-
sal of the brand based on its utility. Customers evaluate what is given and what is receivedso as to determine this aspect of equity (Vogel et al., 2008). Value equity concerns factors
such as price, quality, and convenience. This type of equity is fundamental to establishing
long-term relationships. Brand equityrefers to the differential effect of brand knowledge
on consumer response to the marketing of a brand (Keller, 1993). Brand equity is driven by
brand awareness, brand image, and corporate ethics (Johnson et al., 2006). Each of these
elements serves to enhance the customers perception of the brand and increase attraction
and retention rates.Relationship equityinvolves the special relationship elements that link
the customer to the brand and serve to cement the relationship above and beyond value and
brand equity. Relationship equity represents the customers view of the strength of the
relationship between her/him and a particular company or firm to operate retention pro-grams (Sublaban & Aranha, 2008).
Vogel et al. (2008) have asserted that the major strength of Rust et al.s (2000) model is
its ability to relate a companys perceived marketing strategy and marketing investments
to customers reactions to those investments and the economic output generated by the
related customer behaviour. The model is one of the first attempts to connect the research
streams on brand equity and customer equity, yet their model does not consider some key
aspects of customer loyalty. Thus, their study conceptualises the integration between
customer equity and customer loyalty. On the other hand, a common goal of CRM and
customer equity focuses on an understanding of customers and realising greater value
from customers over the course of a long-term relationship. In marketing literature,
customer loyalty develops long-term, profitable relationships. Thus, this study assumes
that customer loyalty plays an important role in building a long-term relationship that is
measured by customer equity and relationship marketing perspectives in a B2C environ-
ment. To assess the conceptual model, we focus on three sets of variables that we believe
must be of concern for both researchers and practitioners: brand equity variables that treat
customers perception of brand image and company image; relationship variables that
measure by relationship quality (relationship equity) and relationship value (value
equity); and behavioural outcome variable that assess consumer loyalty behaviour.
Brand imageThe literature indicates that brand equity has functional and experiential components
(Keller, 1993; Zaltman, 2003). The functional component reflects a brands intrinsic,
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objective, utilitarian, and tangible aspects. The experiential components reflects a brands
extrinsic, intangible, emotive, and subjective aspects, such as perceived image (Broyles,
Schumann, & Leingpibul, 2009; Keller, 2003). Consumers who do not have any specific
ideas about a product or service use the brand image (or name) to infer the quality of a
product (Lee & Ganesh, 1999). Thus, brand image refers to the understanding that consu-
mers derive from the sum total of brand-related activities engaged in by the firm (Park,Jaworski, & MacInnis, 1986). It is the set of all associations linked in the consumers
memory of a brand (Aaker, 1991; Keller, 1993).
Brand image is a subjective perception, a mental representation of functional and
non-functional information regarding the product or service. One important part of subjec-
tive perception for brand image is the symbolic concepts brand personality (Parker, 2009).
Brand personality is a set of human characteristics associated with a brand (Aaker, 1997).
Thus, a brands advertisement processes or external communications create and influence
conceptions of brand personality. In interpersonal relationships, people extend their
personalities to incorporate the desirable traits attributed to their partners. The members
of high-quality relationships are more satisfied with the roles assumed and performedby the individual parties and are more committed to the relationship (Dorsch, Swanson,
& Kelley, 1998). Consequently, relationship quality develops and translates to consumers
relationships with products and brands. Similarly, a strong brand image helps to control or
stabilise the quality and value perceptions of a branded product or service (Grewal, Krish-
nan, Baker, & Borin, 1998). The previous studies indicate that brand name (image)
appears to serve as a shorthand for quality by giving consumers a bundle of information
about the product (Brucks, Zeithaml, & Naylor, 2000; Teas & Agarwal, 2000). Hence,
studies suggest that brand image (or name) may be a stronger cue for evaluating overall
quality in product and service. Kressmann et al. (2006) argue that a products image
should be an antecedent construct to brand relationship quality. When a brand imagebecomes popular, in their minds visitors link it to an array of benefits and positive expec-
tations (quality, reliability, trust, etc.; Broyles et al., 2009).
Webb, Green, and Brashear (2000) underscore brand image as a driver of value. It has
been argued that brand image has not only immediate value but also long-term value by
guaranteeing future revenue streams (Aaker, 1991, 1997). Exchange aspects of a personal
relationship involve economic factors and offer primarily utilitarian benefits. For this line
of thinking, relationship values are quid-pro-quo: people are concerned with how much
they receive for what they give. If a comparable reward is not forthcoming, a person is
less likely to be responsive to the person. The primary positive outcome of an exchange
relationship is benefit. Hence, in a service context, relationship value may be defined as
a cognitive evaluation of whether or not the exchange relationship with the relationship
is rewarding (Esch, Langner, Schmitt, & Geus, 2006).
In addition, recent literature examines brand image as another driver of customer loyalty.
Existence of customer loyalty is a good supporting evidence of brand images importance in
consumer evaluation of products and services (Lee & Ganesh, 1999). As a result of weakening
brand image/loyalty, little differentiation, and intense price competition, some consumers areno longer intensely loyal and will not switch companies to get a particular brand (Davis-
Sramek, Droge, Mentzer, & Myers, 2009). Kwon and Lennon (2009) explain that brand
image, in turn, affects various attitudinal and behavioural responses of the consumers
towards the company such as customer loyalty that may create a strong company patronage
intention, greatwillingnessto paya price premium, and a strong feeling of affiliation or liking.In the context of relationship marketing, consumers perceived image of a brand can poten-
tially affect consumers loyalty towards the telecom company. Thus, we hypothesise that
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H1: Brand image has a positive impact on relationship quality.
H2: Brand image has a positive impact on relationship value.
H3: Brand image has a positive impact on customer loyalty.
Company imageCompany image can be subcategorised into product reputation, customer relations,
employer role, ethical reputation, and/or the perception of an organisation reflected inthe associations held in the consumers memory (Keller, 1993). Company image affects
a customers choice of a company when service attributes are difficult to evaluate and
also influences a customers perception of the goods and services offered (Andreassen
& Lindestad, 1998; Zeithaml & Bitner, 1996). Recent studies conceptualise a company
image as a corporate social responsibility that refers to the companys approach to
social issues (e.g. investment in philanthropic activities, environmentally responsibility;
Bravoa, Montanerb, & Pina, 2010; Brodie, Whittome, & Brush, 2009). In this regard, a
companys good image is likely to stand out in the marketplace because it drawsboth repeat customers and trial users (Fombrun & Shanley, 1990). For instance, in the
telecom industry, a favourable image separates and distinguishes the company from its
competitors. The more favourable a telecom companys image is, the more likely the con-
sumers will assume that the services tendered by that firm are better or of higher quality.
In service marketing literature, a common link between reputation and satisfaction is
perceived quality. A reputation for high quality means more customers, fewer dissatisfied
customers, and increased profitability (Bennett & Barkensjo, 2005). Zins (2001) have
reported that company image is an outcome of the accumulated attitudes derived from
experience and/or direct or indirect market communication. Because of this relationship,company image should be seen as independent of perceived quality and satisfaction. Con-
versely, company image has a direct relationship on customer behaviour, whether thisrelationship is mediated by satisfaction and perceived service quality (Raimondo et al.,
2008). Understanding the role of company image in relationship quality and customers
perceptions of relationship value is a key issue that has received little attention in the
relationship marketing area. Based on the above studies, this study proposes that
company image affects relationship quality and relationship value.
Building a strong corporate image may lead to consumer preference and loyalty to the
company, generating credibility and, eventually, enabling the firm to obtain a sustainable
competitive advantage (Andreassen & Lindestad, 1998; Fombrun & Shanley, 1990). Park,
Robertson, and Wu (2004) argue that as company image is an important factor that influ-
ences customer loyalty, the role and the effect of company image should be investigated.Company associations may also play an important role, not only in attracting customers
but also in retaining customers (Andreassen & Lindestad, 1998). As a result, the following
hypotheses are proposed.
H4: Company image has a positive impact on relationship quality.
H5: Company image has a positive impact on relationship value.
H6: Company image has a positive impact on customer loyalty.
Relationship quality
Relationship quality represents a general evaluation of relationship strength and the extentto which a relationship meets the needs and expectations of the parties involved based on a
history of successful or unsuccessful encounters or events (Crosby, Evans, & Cowles,
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1990). Previous literature measures relationship quality between service firms and their
customers, between manufacturers/suppliers and distributers/resellers (Chenet, Dagger,& OSullivan, 2010), and between salespeople and customers (Bejou, Wray, & Ingram,
1996). The measurement of relationship quality is crucial to organisational development
in an industrial context, as well as a service context, so that both researchers and
practitioners might better understand and handle relationships. Since many academicand managerial resources have been invested in better understanding relationships, it is
essential to develop ways of evaluating their quality before ultimately assessing their
impact on other key variables, such as performance (Han & Sung, 2008).
Relationship quality is a combination of commitment, satisfaction, and trust (Ulaga &
Eggert, 2006a). On the other hand, relationship quality (trust, benevolence, and commit-
ment) is a distinct construct that differs significantly from service quality (Ward & Dagger,
2007) and is also a better predictor of behavioural intentions than service quality (Bennett
& Barkensjo, 2005). Other studies, such as Ivens (2004), have examined the impact of
relational behaviours on relationship quality in professional service relationships. His
empirical study conducted on 206 purchasers of market research information providesevidence that supplier behaviours, such as role integrity, flexibility, and solidarity, have
an important impact on different dimensions of customer-perceived relationship quality
(satisfaction, trust, and commitment).
Ural (2009) has examined the effect of relationship quality, in terms of satisfaction,
communication quality, information sharing, and long-term orientation, on export per-
formance. Ulaga and Eggert (2006a) have suggested that relationship value is a perform-
ance-based construct that is the outcome of relationship quality. From a cost-effective
perspective, rather than a perceptual or processing perspective, quality is one of the
major relationship marketing factors affecting a customers decision to maintain, build,
or withdraw from a relationship. Further, Cater and Zabkar (2009) have investigated therelationship quality of the professional service industry examining the effects of trust,
social bonds, satisfaction, and commitments on loyalty intention in Central and European
companies. In the retail environment, investments in marketing relationships influence the
quality of marketing relationships which, in turn, influence customer loyalty (Vesel &
Zabkar, 2010). Therefore, we hypothesise that
H7: Relationship quality has a positive impact on relationship value.
H8: Relationship quality has a positive impact on customer loyalty.
Relationship value
The idea of relationship value has roots in business and service marketing, where relation-
ship value is a higher-order construct that has both transactional and relational dimensions
(Barry & Terry, 2008). Ulaga and Eggert (2006a) define different aspects of the value
concept and identified several recurring features. First, the value is a subjectively per-
ceived construct. Different customer segments perceive different values in the same
product. Second, the customer-perceived value is a trade-off between benefits (what
you get) and sacrifices (what you give) perceived by the customer in a suppliers offering.
The distinctions between these definitions exist in the different terms used (utility,
worth, benefits, quality, etc.) and the point of time when the perception of value is
created. Ulaga and Eggert (2006b) have suggested that the relationship value, a cognitive
performance-based construct, measures the buyer seller relationship. Consistent withthis, the customer value examines a customers evaluation of product attributes, the attri-
butes performances, and consequences arising from its use. Previous studies have found a
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linkage between relationship value and the notion of future intentions or customer loyalty
(Dolnicar & Rossiter, 2008; Ravald & Gronroos, 1996). Hence, this study offers the fol-
lowing hypothesis.
H9: Relationship value has a positive impact on customer loyalty.
Based on the above-mentioned hypotheses, Figure 1 depicts the conceptual model of
this study.
Methodology
Sample and procedure
We drew our sample from Taiwans telecom service companies. Taiwans telecom market
is highly competitive, and the companies in our study are representative of this market in
terms of size and success. Responses were collected from a sample of university students
who were actual consumers of telecom services. Even though a student sample is often
viewed with doubt due to their inexperience as consumers compared with adult subjects,
they are at least as likely as adults to have service experiences in the telecommunication
segment. Additionally, students are widely and successfully employed as research subjects
in previous studies in other academic fields (Esch et al., 2006; Ryu, Han, & Jang, 2010;
Taylor & Bearden, 2002). A total of 300 surveys were distributed, and after discarding
questionnaires that were unusable because of unanswered items, 236 useful samples
were obtained, yielding a 78.6% response rate.
Among the 236 usable samples, females made up a majority of the respondents
(51.3%). Almost half of the respondents were 1825 years old (48.7%), and about one-
third were 2630 years old (36%) accounting for the biggest portion of the sample. The
length of the majority of respondents relationships with their telecom operators was
found to be more than 5 years (36.4%), followed by 23 years (19.5%) and then thosewith at least 34 years (16.5%). Finally, respondents telecom service monthly usage
costs were $612 (33.5% of users), $1318 (25.8%), and $1924 (15.3%).
Figure 1. Conceptual model and hypotheses.
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Measures
We developed the items for measuring the constructs of the study, drawing on prior research
in the literature. English questionnaires were professionally translated into Chinese and
then translated back to ensure conceptual equivalence (Mullen, 1995). A sample of univer-
sity students pre-tested the questionnaire before the fieldwork. This procedure led to the
final survey instrument for the main study. We used multi-item five-point Likert scales
with endpoints of strongly disagree (1) and strongly agree (5).
Brand imageis a consumers evaluation of a brand, which an organisation transfers to
the consumer through integrated marketing communication channels such as advertising
and the sponsorship processes. Brand image was measured using six items adapted from
a scale that was developed and validated by Brodie et al. (2009). Sample items read,
The telecom service providers communication programs are warm and engaging and
The telecom service providers communication programs are imaginative. Scale
reliability based on Cronbachs a is high (i.e. a 0.81) and larger than the cut-off
criterion of 0.7 recommended by Hair, Black, Babin, Anderson, and Tatham (2006), indi-
cating that there is a high degree of internal consistency among the construct items.Company image items are chosen to reflect customers overall attitude towards the
telecom service companies reputation, customer relations, employer role, and ethical
reputation. Hence, six-item scale was adopted from Cretu and Brodie (2007). Sample
items read, The telecom service providers service/product is well managed and Thetelecom service provider works successfully. The Cronbach a is 0.74, indicating internal
consistency among the construct items is acceptable.
Relationship qualitymeasures the customers experience about trust, commitment, and
satisfaction. Seven-item measures developed and validated by Ural (2009). Sample items
read, I have the feeling that the telecom service provider is trustworthy, I have a clear
commitment towards the telecom service provider, and I am very satisfied with thetelecom service provider. The Cronbach a for this scale is 0.71, indicating internal con-
sistency among the construct items is acceptable.
Relationship value measures customers judgements about the trade-off between
benefits (a customers perception of the quality of the service features that determine
the service offered) and costs (a customers perception of the monetary and non-monetary
costs of the service offered). Hence, consistent with previous research, three-item
measures are used to assess the customers judgement of worth what paid for (Ulaga
& Eggert, 2006b). A sample item reads, Compared with other telecom service providers,
the relationship with this telecom service provider is more valuable. The Cronbach ais
0.70, indicating internal consistency among the construct items is acceptable.Customer loyalty is likely to influence a customers willingness to stay, repurchase
probability, and likelihood that they will recommend the brand (Johnson et al., 2006).
A two-item scale was adopted from Vogel et al. (2008). A sample item reads, I would
repurchase this telecom service providers services. The Cronbach a is 0.72, indicating
internal consistency among the construct items is acceptable.
The items of all constructs are referred to in Appendix.
Results
Measurement modelTo assess the constructs, confirmatory factor analysis (CFA) was conducted to analyse the
validity and reliability of the constructs. An initial CFA was implemented. However, due to
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their factor loadings being,0.5, three items were eliminated including one company image
item (i.e. innovative service of the telecom company) and two relationship quality items
(i.e. certainly like the telecom company and have a favourable opinion about the telecom
company). The modified CFA with remaining items was then estimated. According to the
goodness-of-fit indices from CFA, the modified measurement model proves parsimonious.
More specifically, although the chi-square statistic (x2 195, df 125) is significant, theratio of the chi-square value to degrees of freedom (x2/df 1.56) is less than the cut-offvalue of 3. Furthermore, other indices such as CFI (0.94), NFI (0.90), and GFI (0.92) are
greater than the recommended value of 0.9. The root-mean-square error of approximation
(RMSEA) is 0.049, which is ,0.10 (Hair et al., 2006). Table 1 reports the CFA results. The
t-values for all the standardised factor loadings of the items are significant (p , 0.01).
Construct reliability estimates range from 0.70 to 0.83, which exceed the critical value of
0.7. The average extracted variances of all constructs range between 0.69 and 0.88 and
are all above the suggested value of 0.5. These results indicate that the measurement
model has good convergent validity. In addition, Table 2 shows the inter-construct corre-
lation, whereby a squared root of AVE for each construct is greater than the correlation
Table 1. Convergent validity.
Constructs Items
Item reliability
Constructreliability
Averagevarianceextracted
Factorloading
t-value
Brand image(BI)
BI1: Think outside the box 0.69 0.83 0.82BI2: Warm and engaging 0.61 6.63BI3: Daring 0.76 8.18
BI4: Spirited 0.76 7.95BI5: Imaginative 0.72 7.59BI6: Up-to-date 0.75 7.85
Company image(CI)
CI1: Is well managed 0.60 0.75 0.69CI2: Is a sponsor of
community events0.71 5.69
CI3: Has high ethicalstandards
0.75 6.01
CI4: Works successfully 0.71 5.88CI5: Has a good image 0.72 6.21
Relationship
quality (RQ)
RQ1: Feeling of confidence 0.88 0.71 0.79
RQ2: Trustworthy 0.82 6.10RQ3: Courteous and
friendly0.77 5.83
RQ4: Commitment towards 0.87 5.87RQ5: Certainly like 0.63 6.37
Relationshipvalue (RV)
RV1: Company adds valueto the relationship
0.77 0.70 0.79
RV2: The relationship ismore valuable
0.81 7.45
RV3: Creates more value,when comparing all costs
and benefits
0.79 7.27
Customerloyalty (CL)
CL1: Repurchase 0.88 0.73 0.88CL2: Recommend to others 0.88 8.04
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coefficients of the corresponding inter-constructs, confirming discriminant validity (Fornell
& Larcker, 1981).
Structural model and hypothesis tests
A structural equation model was applied to estimate the relationships between brand image,
company image, relationship quality, relationship value, and customer loyalty using the
maximum likelihood procedure. Figure 2 shows the estimated model, with standardised
path coefficients. For clarity, only significant paths (p , 0.01) are shown in this figure.
The fit measures indicate that the proposed model fits the data well: x2 (d.f 208,n
126) 1.65, GFI 0.91, NFI 0.91, CFI 0.93, and RMSEA 0.048.
The effects of both brand image and company image on relationship quality are found to
be significantly positive (i.e. b 0.38, t 3.96 and b 0.59,t 5.01, respectively),
indicating that H1and H4are supported (Table 3). In contrast, the effects of both brandimage and company image on relationship value are found to be insignificant (i.e. b
0.01,t 0.01 and b 0.11,t 0.64, respectively), indicating that both image con-
structs have no direct effects on relationship value, and yielding rejection of H2and H5 .
Table 2. Inter-construct correlations (n 236).
Variables Mean SD 1 2 3 4 5
1. Brand image 4.04 0.43 0.612. Company image 4.14 0.41 0.26 0.64
3. Relationship quality 4.15 0.37 0.34
0.45
0.594. Relationship value 4.09 0.40 0.29 0.41 0.49 0.605. Customer loyalty 4.20 0.48 0.21 0.40 0.44 0.52 0.66
Note: Square root of average variance (AVE) is shown on the diagonal of the matrix; inter-construct is shown offthe diagonal.Correlation is significant at the 0.01 level (one-tailed).
Figure 2. Estimated results of the model (t-values in parentheses).Notes: Standardised estimates witht-values in parenthesis. Significant at p , 0.01.
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Interestingly, however, relationship quality is found to have a significant positive effect onrelationship value (i.e.b 0.32,t 4.36), supporting H7and revealing the mediating
roles of relationship quality in the paths: brand image relationship value and company
image relationship value. Furthermore, relationship value is found to have a significant
positive effect on customer loyalty (i.e.b 0.57,t 2.65), thus supporting H9, while
the direct effect of brand image, company image, and relationship quality are found insig-
nificant, thus not supportingH3,H6, andH8. The finding also reflects the indirect effect of
relationship quality on customer loyalty through the mediation of relationship value. In
summary, the path: brand equity (i.e. brand image and company image) relationship
quality relationship value customer loyalty is found evident based on the
results of the estimated model.
Total, direct, and indirect effects on customer loyalty
Table 4 reports the measured the effects on customer loyalty relationships. The total effect
the sum of direct and indirect effects of company image and brand image on customer
loyalty is insignificant, as the latter (0.52) is greater than the former (0.14). The direct link
between relationship quality and customer loyalty is not significant as well, relationship
quality still has an indirect effect on customer loyalty as meditated by relationship
value (0.59). After all, the direct effect of relationship value on customer loyalty (0.52)
is identified.
In this study, the relationships between the brand equity (brand image and companyimage), relationship quality, and relationship value, which are commonly supported in
the literature, are noteworthy. Relationship quality and relationship value play crucial
roles as mediators in the relationship between images and customer loyalty. If the level
of images perceived by customers lead to increase relationship quality, then this in turn
Table 4. Total, direct, and indirect effects on customer loyalty.
Path Direct effect Indirect effect Total effect
Brand image Customer loyalty 0.14 0.14
Company image Customer loyalty 0.52 0.52Relationship quality Customer loyalty 0.59 0.59Relationship value Customer loyalty 0.52 0.52
Table 3. Key parameters of the structural model.
HypothesisStandardised
coefficient t-value Significance
H1:Brand image Relationship quality 0.38 3.96 Supported
H2:Brand image Relationship value 0.01 0.01 RejectedH3:Brand image Loyalty 20.09 20.85 RejectedH4:Company image Relationship quality 0.59 5.01 SupportedH5:Company image Relationship value 0.11 0.64 RejectedH6:Company image Loyalty 0.11 0.85 RejectedH7:Relationship quality Relationship value 0.71 3.02 SupportedH8:Relationship quality Loyalty 0.22 0.85 RejectedH9:Relationship value Loyalty 0.52 2.55 Supported
Cutoff oft-value is 1.96 (p , 0.01).
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increases the level of relationship value. If relationship quality does not increase relation-
ship value, then relationship quality does not affect customer loyalty.
Discussion and conclusion
This study investigates the relationship marketing model using a customer equity perspec-tive to gain a better theoretical and practical understanding of how customers perceptions
of brand image and company image influence relationship marketing perspectives
(relationship quality and relationship value) and loyalty. From a theoretical point of
view, the main contribution of this study lies in the development and testing of inter-
relationships of the customer equity model with relationship quality and relationship
value in a B2C environment. Past studies on customer equity primarily focused on
brand equity, value equity, and relationship equity and generally did not incorporate the
relationship marketing perspective. This study develops and tests additional theoretical
linkages between the antecedents of relationship quality and relationship value. The
present study also shows how the customer equity and relationship marketing conceptsfurther influence customer loyalty.
The influences of brand image and company image on perceptions of relationship
quality and relationship value differ in importance. Brand image has a strong influence
on relationship quality, but does not influence relationship value. Similarly, company
image also has a strong influence on relationship quality, but does not influence relation-
ship value. The relationship marketing frameworks suggest that established models of
buyerseller relationships might insufficiently reflect a managerial emphasis on a seller
performance evaluation. Indeed, customers monitor sellers periodically to track seller per-
formance over time. Seller performance evaluation tools are important, because they
trade-off the benefits and costs incurred in a purchasing relationship. Such toolsmeasure the customer-perceived value of the relationship (Ulaga & Eggert, 2006a).
Thus, the present study assumes that customers perceptions of brand image and
company image are first evaluated by perceived quality of the relationship. Because
relationship quality is the degree to which a relationship fulfils the needs of the customer
(Henning-Thurau & Klee, 1997), customer satisfaction with, and trust in, the relationship
leads customer perceptions of relationship value (Macintosh, 2007). A feeling of famili-
arity, personal recognition, and trust are also factors why buyers like to develop
ongoing relationships with their service companies (Low & Johnston, 2006).
Findings also indicate that brand image and company image do not prove a determinant
of customerloyalty.Relationship quality alsoseems to haveinsignificant impact on customer
loyalty. In contrast, relationship quality significantly influences relationship value, while
relationship value affects customer loyalty. Bloemer, Ruyter and Peeters (1998) revealed
that image is indirectly related to loyalty. Research evidence shows that brand images and
company images are extrinsic quality cues. Thus, it effects on consumers perceptions of
product/service quality (Teas & Agarwal, 2000). In this study, consumers perception ofbrand equity via brand image and company image firstly evaluates by their perceived
relationship quality such as satisfaction, trust and commitment. Moreover, brand equity is
mediated by relationship quality to affect loyalty in the telecom services industry. For
instance, Kwon and Lennon (2009) mentioned that in order to enjoy benefits of customer
loyalty such as reduced customer acquisition costs, increased base revenues, and positive
word-of-mouth; firms should not buy customer loyalty through loyalty schemes such asloyalty cards and company image, but achieve it through excellent service quality and
customer satisfaction.
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Ural (2009) considered relationship quality to be the quality of interaction between a
customer and supplier, and interpreted this in terms of accumulated values. In the same
sense, Ravald and Gronroos (1996) stated that during the first stages of a relationship
the quality of each transaction is of great importance, while in later stages it is relationship
value that counts. In fact, in the relationship marketing research domain, creating customer
value has gradually become more and more regarded as the next source of competitiveadvantage (Woodruff, 1997), whereas customer-perceived quality is commonly recog-
nised as a significant and positive antecedent (Bennett & Barkensjo, 2005). According
to Izquierdo et al. (2005), in customerseller relationships, customers benefit in terms
of higher value, better quality, and increased satisfaction with their purchases, while
firms benefit from greater sales volumes, better operating efficiencies, positive
word-of-mouth publicity, improved customer feedback, and decreased marketing
expenses. Research indicates that relationship quality is a positive function of relationship
value. In turn, purchase intentions, which represent a consumers willingness to buy, are
also influenced by relationship value (Taylor & Bearden, 2002). Considering the signifi-
cant causal relationships in the study, the findings show the following sequences:images relationship quality relationship value customer loyalty. These
sequences highlight the importance of having a coordinated marketing programme that
integrates the external communications, which build customers perceptions of brand
image and company image, with relationship quality in terms of relationship processes
based on customer trust, customer commitment, and customer satisfaction. As a result,
customer perception of relationship quality contributes to relationship value through
customer loyalty.
Managerial implications
From a managerial point of view, this study has some implications for managing the
relationships of telecom services companies with their customers. Collaborative relation-
ships between firms and customers represent a significant trend in the current competitive
business environment (Cater & Zabkar, 2009). Brand equity (brand image and company
image) is of primary importance in maintaining relationship quality. Thus, the results
suggest that a firm should control external marketing communications (particularly
from advertising and sponsorship) and maintain promises about the companys image
(is involved with the community, is well managed, is successful, etc). When a brand is per-
ceived as attractive and unique, customers are less likely to switch (Rosenbaum & Wong,
2009; Vogel et al., 2008). For this reason, managers should concentrate on creating and
maintaining brand equity in order to directly influence relationship quality. In creating
brand equity, managers can improve brand image and verify the stability of delivery of
a companys promises (company image) at a level that exceeds the customers
expectations.
The findings also reveal that relationship equity (relationship quality) is important to
relationship value in predicting loyal customers. Alternatively, relationship quality is
one of the key strategic issues for managers to consider when establishing and maintaining
long-term relationships with their customers. Relationship quality in the B2C markets is
shaped by multiple factors. For long-term relationship success, relationship quality vari-
ables such as trust, satisfaction and commitment play an important role in buying behav-
iour. Therefore, managers are well advised to use measures of relationship quality inaddition to brand equity measures. They should also develop strategic and tactical initiat-
ives that ensure that consumers are satisfied with the service, trust it and feel attached to it.
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This may require that managers employ not only standard marketing mix and communi-
cation techniques but also experiential marketing techniques, which result in increased
interactions and emotional connections between the customer and the company (Esch
et al., 2006).
This study further reveals that value equity (relationship value) is a significant driver of
customer loyalty. The result suggests that firms should meet customers expectations byconsidering the evaluations of costs and benefits within a relationship (Ulaga & Eggert,
2006a). Generally speaking, value equity represents a customers evaluation of what is
given up (price) and what is received in return (value). A firm can consider delivering
different aspects of value to the customer including brand equity, brand image, company
image, relationship quality, price, service quality, and product quality. Finally, the
purpose of relationship marketing, to managers, is to help remove some of the uncertainty
in decision-making with regards to customers. Relationship marketing is gaining in impor-
tance as markets become ever more competitive and firms in competitive markets become
increasingly concerned about customer retention and maintaining long-term relationships.
Relationship marketing managers may be able to develop relationships equipped withknowledge of critical antecedents and consequences of relationship quality and relationship
value. Adopting an evolutionary perspective, we suggest that customers perceived
relationship quality and relationship value should be considered as instrumental to building
relationships. We advise managers to consider the idea of differentiating their company
image and brand image to build long-term relationships and loyalty.
Limitations and further research
The substantive findings of this study should be viewed in light of its limitations. First, the
present study analyses particular telecom service firms from one industry. Therefore,caution should be exercised in generalising our findings to other telecom companies or
industries. For an industry in which relationship quality differs among providers, relation-
ship value might be a source of competitive advantage, whereas in industries or telecom
settings in which involvement is low, establishing brand communities might not be a good
investment. Second, further research is required to extend structural equation modelling in
order to provide a richer description of different types of markets. A relationship is a criti-
cal phenomenon related to interaction between social units and social capital formation.
Brand image and company image can help build up some types of social relationship
between customers and telecom service firms. For instance, membership programs can
consider maintaining long-term development plans that benefit the involved parties. Onthe other hand, researchers could also propose a relationship quality construct separated
by trust, commitment, and satisfaction. This would help to develop clearer understanding
of relationship quality, which affects customer loyalty in different ways.
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Appendix. Questionnaire used to measure the constructs
Brand image The telecom service providers communication programmes think outside thebox
The telecom service providers communication programmes are warm andengaging
The telecom service providers communication programmes are daringThe telecom service providers communication programmes are spiritedThe telecom service providers communication programmes are imaginativeThe telecom service providers communication programmes are up-to-date
Company image The telecom service providers service/product is well managedThe telecom service provider is an active sponsor of community eventsThe telecom service provider has high ethical standards with respect to its
customers and employeesThe telecom service provider works successfullyThe telecom service provider is innovative in its serviceIn my opinion, the telecom service provider has a good image in the minds of
customersRelationship
qualityThe telecom service provider gives me a feeling of confidence (trust)I have the feeling that the telecom service provider is trustworthy (trust)The telecom service provider has always been courteous and friendly
(commitment)I have a clear commitment towards the telecom service provider (commitment)I certainly like the telecom service provider (satisfaction)I am very satisfied with the telecom service provider (satisfaction)I have a favourable opinion about the telecom service provider (satisfaction)
Relationship value Compared with other telecom service providers, this telecom service provideradds more value to the relationship
Compared with other telecom service providers, the relationship with this
telecom service provider is more valuableCompared with other telecom service providers, this telecom service providercreates more value, when comparing all costs and benefits in the relationship
Customer loyalty I would repurchase this telecom service providers servicesI would recommend this telecom service providers services to others
18 C.-F. Chen and O. Myagmarsuren