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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

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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

    http://www.informaworld.com

    Corresponding author. Email: [email protected]

    Total Quality Management

    2011, iFirst Article, 118

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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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    Total Quality Management 17

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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