Are customer satisfaction and customer loyalty drivers
of customer lifetime value in mobile data services:
a comparative cross-country study Jia-Yin Qi
Yong-Pin Zhou
Wen-Jing Chen
Qi-Xing Qu Published online: 11 July 2012 Springer Science+Business Media, LLC 2012 Abstract Many research papers have been published on the effect of customer satisfaction and customer loyalty on customer protability which is related to customer lifetime value (CLV). However, there is limited research on the impact of cross-cultural factors on the effect of customer satisfaction and customer loyalty on CLV. This study aims to ll this gap. Focusing on the usage of mobile data ser- vices, 846 samples from China and 689 from the US are obtained. Data analysis suggests that customer loyalty is a driver of CLV, while customer satisfaction is not. This research has important implications for rms about how to enhance CLV in mobile data services. Keywords Customer lifetime value (CLV) Cross- cultural Customer satisfaction Customer loyalty Mobile data services E-business 1 Introduction Customer relationship management (CRM) is a holistic approach to managing customer relationship and creating shareholder value. CRM integrates marketing strategies and uses IT to create protable, long-term relationship with customers and other stakeholders [6, 61, 77, 84]. By employing CRM, a rm can enhance its knowledge about customers, thereby enabling itself to provide customers with products that meet their needs more precisely, and lead to increase customer value and higher prot [36, 58, 86]. Customer lifetime value (CLV) is important in the context of CRM because it is one of the ve marketing metrics to evaluate marketing decisions [91]. Two issues considered important by most rms in practice: (1) who the most protable customers are; and (2) how to identify them. This has led to very active research on the measurement of CLV in recent years. Firms can implement a protable customer management strategy based on the measurement of CLV. However, for many rms, the most protable customers are a small portion of their customer base, while a large number of customers are less protable, and even unprotable. Therefore, it becomes vital to raise the CLV for most of their customers. Compared with the study on CLV measurement modeling, there is a dearth of empirical research on how to raise customers CLV [10]. The growing economic globalization has led to greater customer resource globalization [61, 103105]. Thus, national environmental factor (NEF) becomes a factor inuencing the success of a rms CLV enhancement strategy [105]. A multinational rm, therefore, must learn to customize its CRM strategy to suit each region and its culture, in order to better manage customer resource across national boundaries [66, 102, 105]. For example, cultural J.-Y. Qi (&) W.-J. Chen Q.-X. Qu School of Economics and Management, Beijing University of Posts and Telecommunications, P.O.BOX 295, Beijing 100876, Peoples Republic of China e-mail: qijiayin@bupt.edu.cn W.-J. Chen e-mail: cwjing1978@163.com Q.-X. Qu e-mail: quqx85@yahoo.com.cn Y.-P. Zhou Department of Information Systems and Operations Management, University of Washington Business School, Box 353200, Seattle, WA 98195-3200, USA e-mail: yongpin@uw.edu 1 3 Inf Technol Manag (2012) 13:281296 DOI 10.1007/s10799-012-0132-y difference between countries or regions can lead to dif- ferent customer consumption behaviors [69]. Therefore, to achieve greater prots, a successful CLV enhancement strategy requires a rm to understand the customers diverse consumption behaviors inuenced by culture and value, and to adopt a corresponding strategy to improve its relationship with the customers. Identifying the drivers of CLV is the rst step in enhancing it. The relationship between expected CLV drivers and CLV components can be the proof to identify CLV drivers. Customer lifetime duration and customer revenue are the two essential CLV components. Customer satisfaction and customer loyalty are considered the two key drivers to improve CLV. It is often believed that customer satisfaction can positively relate with customer lifetime duration and customer revenue [11, 12, 46, 74], which are the two important components of CLV. An opposing view held by other researchers is that customer satisfaction may cause positive purchase intention and keep relationship intention, but it cannot certainly lead to sub- sequent purchase behavior and non-defection behavior [19, 64, 78, 92]. To date, there is little consensus on whether customer satisfaction is a driver of CLV. The situation is similar for customer loyalty. While some researchers view customer loyalty as a driver of CLV because it can bring more future purchases and longer relationship duration [13, 37, 82, 93, 97], others think the effect of customer loyalty is overrated or simplied. In some cases, customer loyalty can have positive effect on CLV, but in other cases it cannot [25, 85]. More empirical research is thus needed to explore whether customer sat- isfaction and customer loyalty are drivers of CLV. The strength of the effect of CLV drivers on CLV components could differ between western and eastern countries with national cultures that are very different from each other. Although some have recognized customer value research under cross-cultural background as an important future research direction in the eld of customer value management [34], the research on enhancing CLV in the context of different national cultures is almost non-existent until recently. We aim to clarify the drivers of CLV under the cross-cultural background in this study. To the best of our knowledge, our research is the rst to study whether customer satisfaction and customer loyalty are CLV drivers under cross-national background. We choose the US and China as the two countries to do the comparative cross national research for three reasons: (1) the US and China are representative of countries with western and eastern cultures; (2) the US is the most developed country in the world, while China is the largest developing country with the fastest developing economy; (3) both countries have become the most important markets for many rms. The consumption of mobile data services in the tele- communications industry is a good market segment for our research for several reasons. First, it has become increas- ingly important to increase CLV on data usage for tele- communication carriers [57]. Mobile data service revenue, as a percentage of the total industry revenue, has been increasing [47]. The growth continues even during the current economic downturn, when the growth of the tele- communications industry as a whole has slowed down [33, 80]. Second, there are obvious regional differences between the behaviors of mobile data service users [21, 79]. Customers perception of the importance of the same mobile data service and their willingness to pay for it differ signicantly across countries [52]. Thus, customers pre- ferred mobile data services also differ across countries [54, 81]. Third, although the aforementioned regional differ- ence in mobile data services usage pattern has been noticed in telecommunications industry, there is little research in the existing literature that can evaluate the impact of national culture on this difference. This paper will address the following issues: 1. Are customer satisfaction and customer loyalty drivers of CLV? 2. Does NEF inuence the effect of the various CLV drivers on CLV components? 3. As for China and the US, what are the respective key factors to enhance CLV? The rst question is important for formulating marketing strategies for enhancing customers CLV. The second question is especially relevant in the context of greater globalization in the last few decades, and will give some guidance for international companies to do business across the world. The third question is to follow up the rst two and has implications for a rms marketing strategies in the US and China. Once a rm recognizes how NEF affects the drivers of CLV, it should adopt appropriate approaches to enhance CLV to suit the national culture it operates in. In answering these questions, we examined the moder- ating effect of NEF on the relationships between the drivers of CLV and CLV components. If we nd signicant moderating effects of NEF, then a rm must take them into account in order to enhance its CLV. Below, we rst develop theoretical conceptual model and the hypotheses, and then describe how to measure the various factors involved in the model. Next, we describe in details the research hypothesis validation process and verication results. After that, we summarize and discuss the validation results and make recommendations about how to enhance CLV in mobile data services from a cross- cultural perspective. Finally, we conclude the paper with a discussion of limitations to our research and topics for future research. 282 Inf Technol Manag (2012) 13:281296 1 3 2 Theoretical background 2.1 CLV components A customers CLV for a rm is the net prot or loss to the rm from a customer over the entire life of transactions of that customer with the rm. Usually, the CLV of a cus- tomer for a rm is the net revenues obtained from the customer over the lifetime of transactions with that cus- tomer minus the cost of attracting, selling, and serving that customer, taking into account the time value of money [50]. Consequently, relationship duration, revenues, and costs are selected as the components of CLV in our model [10]. Here, relationship duration is the time length of the entire customer relationship life cycle; revenues are the expected revenues generated by the customer, including autonomous revenue, up-selling revenue and cross-selling revenue; costs are the entire expected costs to serve the customer including acquisition costs, marketing costs, sales costs and termination costs. Although Reinartz and Kumar [86] nd that relationship duration has a small correlation with future CLV in some contexts, most of the researchers agree that there is a positive relationship between customer relationship duration and CLV [50, 83]. That means the longer the customer relationship duration is, the greater the CLV will be. If we assume the cost for each customer is equal, it is certainly that the bigger the revenues, the larger the CLV. So, to increase CLV, it is necessary to extend relationship duration, increase revenues, and decrease costs. Because data on many factors that affect the operating costs are extremely difcult to obtain, we have excluded costs from our model. As a result, our model focuses on relationship duration and revenue as the components of CLV. This does not pose a problem for our analysis. One reason is that the CLV components do not interact with each other, if we omit one component, the relationships between the variables and the other two components will not been affected. The second reason is that the telecom- munications industry generally has high xed cost and low variable cost for each subscriber of mobile data services; thus, we can consider the cost of each customer as approximate the same in this study. 2.2 Expected CLV drivers There may be many complex factors that drive the afore- mentioned CLV components, which include customer satisfaction, commitment, trust, and loyalty. However, there is no consensus on which dimensions make up CLV drivers and the existing models have mainly considered two following relationship quality related factors: customer satisfaction and customer loyalty. Although commitment and trust is also considered as two dimensions of rela- tionship quality [100], they can be replaced by loyalty [83]. As an important outcome of customer relationship quality, customer loyalty is considered as the highest level of relational bonding and maintains a long-term relationship [56], while customer satisfaction is an important dimension of customer relationship quality which has a direct and indirect inuence [59, 87]. In the CLV literature, Ho et al. [41] introduce customer satisfaction into the CLV calcu- lation based on the Pareto/NBD model; Hwanag et al. [49] introduce customer loyalty into the CLV model. Customer satisfaction describes customer feelings toward the rm and its products/service [62, 63, 103]. It has also been dened as customer reaction to the state of ful- llment of their expectation and needs, customer judgment towards service and products quality [27, 32, 39, 75, 107]. Customer satisfaction is a positive experience on enter- prises which can stimulate customers purchasing behavior [20, 90]. A commonly used statistical result is that a very satised customer is six times more likely to repurchase than a merely satised customer. Customer loyalty is the internal positive attitude, emo- tion, preference expressed by customer to a brand or product/service. It means that loyal customers have some preference or dependency on one particular brand or its provider, cannot easily be tempted by competitive prod- ucts, and will pay for it repeatedly, even recommending it to relatives and friends on their own initiative [65, 82, 84]. 2.3 Does national culture matter for improving CLV? Culture can be viewed as a set of shared characteristics (symbols, norms, and values etc.) within a group of people that affect the behaviors of individual members by pro- viding norms for that group [21, 70]. It can also be seen as a store of social knowledge, whereas a country is often seen as a cultural studies unit. Value is the foundation of culture [45], and culture affects the overall function of society through cultural values. Therefore, depending on the spe- cic culture conguration of values, certain sets of behavior pattern occur. According to [38, 44, 45], there are seven cultural variables, namely power distance, uncertainty avoidance, individualism, masculinity, communication context, long- term orientation and time perspective. Among these cul- tural dimensions, four ones are relevant to our study: uncertainty avoidance, individualism, communication context and long-term orientation. Based on the research in [42, 43, 45] and the results of other culture research [1, 28, 31, 53, 55, 94, 96, 108], the cultural value of China and the US can be described in Table 1. Individualism represents a preference for a loosely-knit social framework where people are expected to take care of Inf Technol Manag (2012) 13:281296 283 1 3 themselves and their own interests, whereas collectivism indicates an inclination toward a tightly-knit social framework where people expect their companies to look out for their welfare and where personal goals are subor- dinated to those of the group [45]. This cultural value inuences customer behaviors [99] and the rms strategy to attract them. Advertisement which aims at individualism focuses on the individual enjoyment, while the collectivist culture pays more attention to the relationships among people [98]. Uncertainty avoidance is the degree to which members of society feel uncomfortable with uncertainty and ambi- guity, which leads them to seek conformity [96]. If uncertainty avoidance is strong, people tend to avoid risk and seek security; otherwise, if the uncertainty avoidance is weak, people will look for more challenges and are willing to accept new products or services. Money and Grotts [73] and Cyr [22] prove the effect of uncertainty avoidance on consumers behaviors. Low communication context means information is sta- ted directly and reects a preference for hard, quantiable detail as compared to high context, which reects a pref- erence to draw conclusions from implicit information via intuition [96]. In high communication context culture, explicit communications and clear procedures are pre- ferred, while in low communication context culture, group bonds and harmony are viewed as important [108]. The difference of communication context can inuence cus- tomers choice. For example, the short message services of mobile data services are more popular in eastern countries than in western countries because most of the eastern customers live in high communication context and most of the western customers live in low communication context. Long-term or short-term orientation is a salient aspect of national culture values and has inuences on consumers decision making processes. According to [42], on the long- term orientation side, one nds values oriented towards the future and represented by values such as perseverance, ordering relationships by status and observing that order, thrift, and having a sense of shame; on the short-term orientation, one nds values rather oriented towards the past and the present and represented by values such as personal steadiness and stability, saving face, and others. Confucian ethics lead to long-term orientation of eastern cultures. Donthu and Yoo [24] prove that long-term ori- ented customers have lower service quality expectations than short-term oriented customers and long-term oriented customers also place lesser importance on responsiveness than short-term oriented customers. National culture has a strong relation with customer satisfaction. Hejaili et al. [40] study the patient satisfaction in Austria, Syria, Saudi Arabia and the United Arab Emirates (UAE). They show that patients in Saudi Arabia and the UAE are the most likely to show satisfaction with healthcare services, while those in Austria are the least likely. Those in Syria show medium satisfaction. The author suggests that it is the characteristics of Arab culture that make people of Gulf States have a more optimistic assessment of things. Ruetzler [88], who studies food and beverage service quality of a university in Southeast Asia, compares the service quality assessment of four groups of students from Asia (excluding India), Latin America, India, and Canada. The results nd that people from different cultural backgrounds assess the same service signicantly differently. Eng and Kim [26] study customer e-loyalty in e-shop- ping in South Korea. They show that the remarkable fea- tures of Confucian culture (high power distance, collectivism) have a positive correlation with customer e-loyalty. In particular, the research nds collectivism has a strong positive correlation with customer lock-in of cus- tomer e-loyalty. Cyr [22] is among the few researchers that discuss the moderating effects of culture on the relationship between the antecedents of customer loyalty and customer loyalty. The paper nds that collectivism culture can sig- nicantly strengthen the relationship. As we described earlier, we have found some cross cultural research on CLV drivers (most of them are in recent years). However, there is very little cross cultural empirical research on the relations between CLV drivers and CLV components. Thus, we have little evidence to judge whether national culture matters for a rms CLV enhancing. Using the US and China with different national cultures as two comparative countries, this study aims at exploring the key CLV drivers for the two countries, respectively. 3 Hypothesis and model 3.1 The moderating effect of NEF on CLV drivers Customer satisfaction is a mental state which results from the customers comparison of expectation prior to a pur- chase with performance perceptions after a purchase. On the one hand, whether a customer complains directly to the rm after a product or service failure is affected by Table 1 Cultural values of China and the US China US Individualism Collectivism Individualism Uncertainty avoidance Weak Strong Communication context High Low Long-term orientation High Low 284 Inf Technol Manag (2012) 13:281296 1 3 social attitude towards the complaint behavior, which is in turn related to the extent of the cultures collectivism and long-term orientation. In collectivistic and long-term ori- entation cultures, conict is typically viewed negative, and avoided and even suppressed [15, 17, 60]. Hence, conict avoidance is prevalent in East Asia, especially in China. A society that is more oriented toward collectivism and long- term orientation has social norms with less allowance for complaints, and people express more negative attitude toward complaining behavior. For example, by following the Golden Mean principle, Chinese people try hard to be neutral and avoid extreme attitudes as a way to protect themselves in society. It seems that people under collec- tivistic and long-term oriented culture have higher degree of tolerance than those under individualistic and short-term oriented culture. Therefore, it is likely for Chinese people to give a higher evaluation even when they are dissatised. On the other hand, a persons self-evaluation emotion is affected by his/her cultural background. An individualistic theory of human nature assumes that a persons interests are best served by permitting maximum freedom and responsibility for choosing objectives and the means for obtaining them. Freedom is an important component of individualism. Low communication context is helpful for a person to express his or her real opinions and to pursue his or her goals directly. In contrast, in collectivism and high communication context society, personal identity is dened in terms of the system of relationships in which a person is involved, and people are inclined to avoid extreme evalu- ation to things explicitly. Thus, harmony is an important component of relational identity [5]. Since modesty is viewed as a good character in the Chinese society, while individual right is highly advocated in the U S, it is likely for Chinese people to give a modest evaluation when they are satised or dissatised. Thus, we hypothesize: H1 Chinese customers are more likely to generate more moderate customer satisfaction than customers in the US. Several reasons have been given as to why Chinese customers are more likely to generate customer loyalty than American customers: In a collectivist culture people prefer a tightly knit social framework in which individuals can expect their relatives, clan, or others in the group to look after them in exchange for unquestioning loyalty [101]. In contrast, people in an individualist culture prefer a loosely knit social framework in society wherein individ- uals are supposed to take care of themselves and their families [98]. Wheeler et al. [101] show that collectivist cultures tend to engage in long-term in-group relationships and have more intimate relationships among in-group members. Therefore, it is more likely for customers in a collectivist society to have feelings of interdependence with the rm if the rm provides good customer care. This likely makes it easier to generate customer loyalty with good service in a collectivist culture. This does not, however, lead to the conclusion that Chinese customers are more loyal to their product/service providers than their counterparts of the US to their product/ service providers. The rst reason lies in balance between face and guanxi, which are the two very important ele- ments of Confucian culture and relate to Hofstedes cul- tural dimensions of collectivism and high power distance. The high importance that Chinese people place on face will cause brand loyalty to a rms product or service brand; while the maintenance of cordial guanxi could bring personal loyalty to in-group persons, not organizational loyalty to a rm [29]. The second reason is that Chinese collectivism differs substantially from that in other Asian countries. Chinese collectivism is individualistic collec- tivism where small group or family, rather than society, value is emphasized [67]. The third reason is uncertainty avoidance [22]. China is a high uncertainty avoidance society where people adapt to changes to avoid risk. Comparatively, the US is a low avoidance society, where people are more willing to have a try, tend to accept innovation and are more likely to adapt to changes. This may cause the Americans to be more loyal to high-tech products/services than the Chinese. Considering the features of mobile data services, which are characterized by innovation and change, it seems that in this particular market the Americans should be more loyal to the usage of mobile data services than the Chinese do. We thus hypothesize: H2 American customers are more likely to generate customer loyalty than Chinese customers in the mobile data service market. 3.2 The moderating effect of NEF on the relations among CLV drivers Matos [69] nds that there is a strong positive relation between customer satisfaction and customer loyalty. This strong link is further demonstrated by [14, 18, 23, 30, 39, 51, 68, 76]. According to H1, Chinese customers are more likely to show moderate customer satisfaction (i.e., say OK instead of unsatisfactory and satised instead of very satised), thereby weakening the positive relation between customer satisfaction and customer loyalty. Thus, we hypothesize: H3 The positive relation between customer satisfaction and customer loyalty is much stronger for American cus- tomers than for Chinese customers. Inf Technol Manag (2012) 13:281296 285 1 3 3.3 The moderating effect of NEF on the relations between CLV drivers and the components of CLV 3.3.1 Customer satisfaction as a CLV driver For most of the previous studies, satised customers are more likely to view the rm as less risky and thus are more likely to adopt other products from the same rm and to increase volume and frequency with the rm [91]. Bolton and Lemon [12] report a positive effect of customer sat- isfaction on usage of a service (telecommunications and entertainment). Homburg et al. [46] reveal the existence of a strong positive impact of customer satisfaction on will- ingness to pay. Therefore, the improvement of customer satisfaction can lead to the increase of customer revenue. Oliver holds that customer satisfaction represents an important source of revenue for rms [75]. However, Seider et al. [89] question the explicit assumption that satised customers repurchase more and therefore are more protable. They propose that the rela- tionship between satisfaction and repurchase behavior is moderated by customer, relational, and marketplace char- acteristics. The results suggest that the relationship between customer satisfaction and repurchase behavior is contingent on the moderating effects of convenience, competitive intensity, customer involvement, and household income. Convenience is a positive moderator of satisfactions effect on repurchase visits and spending, while increasing com- petition will attenuate the positive effect of convenience. Involved customers and high income customers both spend even more when their satisfaction is high. For some people (e.g. the youth) it is very convenient to subscribe and use mobile data services, while for other people (such as the elderly) it may be difcult for them to manage the subscription and the un-subscription processes. Compared with retailing industry, telecommunication industry has relative lower competition intensity, which may decrease the positive effect of customer satisfaction on customer spending. Combining the views from most researchers and the view of [89], for mobile data services, it seems that the positive relationship between customer satisfaction and customer revenue will be non-signicant. Although compared with the Americans, the Chinese are more likely to moderate their satisfaction level, which may have a moderating effect on the relationship between cus- tomer satisfaction and customer revenue, the non-signi- cant relationship between the two variables will not differ in the two countries. Thus, we have the following hypothesis: H4a For mobile data services, the relationship between customer satisfaction and customer revenue is non-signif- icant in both China and the US. Customer satisfaction also has a positive effect on cus- tomer relationship duration. Fomell [30] shows that satis- ed customers are more likely to keep stable relationship with the rm. Hallowell and Bolton [11, 39] conrm that there is positive correlation between customer satisfaction and relationship duration in the retail banking and cell phone areas, respectively. However, Yeung and Ennew [106] nd that the strength of the impact of customer satisfaction, in terms of both the relation between customer satisfaction and customer reve- nues and the relation between customer satisfaction and relationship duration, varies with the industry sector. For example, the relationship is stronger in nancial sectors but weaker in technology and communication sectors. It seems that industry sectors characteristics can moderate. Although the positive relationship between customer satisfaction and customer relationship duration is accepted by most researchers, empirical evidence reveals that many customers who state they are very satised with a service provider nevertheless subsequently defect. Chandrasheka- ran et al. [19] decompose a customers stated satisfaction into satisfaction level and satisfaction strength, and dem- onstrate that customer satisfaction strength plays a central role in the translation of customer satisfaction to the length of customer relationship. Uncertainty and weakly-held judgments promote customer vulnerability, which will weaken the relationship between customer satisfaction and relationship duration. For mobile data services, continuous innovations and rapid changes are the two important features. The increasingly faster update rate of mobile data services may keep customer satisfaction at a high level, but it may also weaken the satisfaction strength between cus- tomers and the present mobile data services. This brings some uncertainty in the consumption of mobile data services. It is expected that the relationship between customer satisfaction and customer revenue would be non-signicant in this consumption area. Because mobile data service has the same features in China and the US, we hypothesize: H4b For mobile data services, the relationship between customer satisfaction and customer duration is non-signif- icant in both China and the US. 3.3.2 Customer loyalty as a CLV driver It has been found that loyal customers generate much more customer revenue. In an online business-to-customer (B2C) context, Srinivasan [93] shows that more loyal customers generate higher autonomous revenue because they have greater willingness to pay. Bourdeau [13] shows customer loyalty has a direct, positive effect on customers exclusive 286 Inf Technol Manag (2012) 13:281296 1 3 consideration, strength of preference and share of wallet. These then lead to more up selling and cross selling. As for the relationship between customer loyalty and customer relationship duration, the previous studies have consistent view that higher customer loyalty also leads to longer customer relationship duration. Reichheld [83] analyzes the value of loyalty systematically and believes that loyal customers have a longer customer duration time. Tsao et al. [97] nd that customer loyalty effect is posi- tively related to customer retention rate, which is the probability of a customer being alive. The role of customer loyalty is more obvious in the service industry than other industries [7, 37]. Most service rms use customer loyalty as a metric to design marketing strategies aimed at decreasing customer churn and increasing customer consumption. On the other hand, Dowling and Mark [25] consider that loyal customers spend more with the company is a gross over-simplica- tion. Further, they point out that only in some market conditions more customer loyalty generates more customer revenue. These conditions can be summarized as: (a) there is open competition; (b) products and services are func- tionally equivalent in broad terms (and therefore substi- tutable); (c) there is little tendency for any brand to uniquely appeal to a particular subgroup of consumers; and (d) there is little dynamic variation over time in competing brands market shares. Some products and services, such as state monopolies, highly innovative new products, and products whose success depends on fads and fashions, do not appear to match these market conditions. Telecommunication industry is not a sufciently open competition industry. Mobile data services are typical highly innovative products, and to some extent, their market adoption depends on customers fashion con- sumption experiences perceived from the usage of mobile data services. According to Dowling and Marks [25] opinions, it seems that the positive relation between cus- tomer loyalty and customer revenue may not stand in the consumption area of mobile data services. Since the characteristics of mobile data service will not differ between China and the US, it is expected that: H5a For mobile data services, the relationship between customer loyalty and customer revenue is non-signicant in both China and the US. H5b For mobile data services, the relationship between customer loyalty and customer duration is non-signicant in both China and the US. Considering NEF as the moderator, we propose the theoretical model of this research shown in Fig. 1. We want to clarify the difference of CLV drivers, the differ- ence of the relationships between CLV drivers and CLV components between the US and China. Thus, we want to get the answer for how to improve CLV under the different culture background of China and the US. 4 Research method 4.1 Sample and data collection We conducted surveys in the US and China simultaneously through various channels including online survey, e-mail survey, and in-person survey. Sample design is conducted by quota sampling. Data Collection in China We limited survey subjects to persons who were born in Beijing, China, have lived in Beijing for at least 5 years, and have used mobile data services. We designed sampling quota by gender, age, and occupation in accordance with the demographics of this target population. Surveys were conducted by email and through in-person interviews. There were 905 samples in total, but after screening and deleting invalid samples, we obtained 875 valid samples. The amount of sample used for data analysis is consistent with quota sample. Data Collection in the US We limited survey subjects to mobile data services users who were born in Seattle, Fig. 1 Theoretical conceptual model Inf Technol Manag (2012) 13:281296 287 1 3 USA, or have lived there for at least 5 years. Again, we designed sampling quota by gender, age, and race in accordance with the demographics of this target population based on the Census 2000 of the United States. Surveys were conducted online and through in-person interviews. There were 850 samples in total, but after screening and deleting invalid samples, we obtained 689 valid samples. The amount of sample used for data analysis is consistent with quota sample. 4.2 Measurement development and validity We measure national culture and CLV drivers on a seven- point Likert scale (1 = strongly disagree, and 7 = strongly agree). The components of CLV, on the other hand, are calculated from data collected in the survey. The research instrument was developed on the basis of prior studies in the west. For the Chinese sample, the English questionnaire was translated into Chinese. We conducted 15 in-depth interviews with random samples meeting in the street to ensure the face validity of the measures. The above pro- cedures to get both Chinese and American survey ques- tionnaires follow Brislins methodology [16]. 4.2.1 The measurement of CLV drivers Customer satisfaction can be measured by the disconr- mation of expectation for each part of an offer or for the offer in total. Repeated purchase, positive attitude, expec- ted purchase and recommendation are the main factors used to measure customer loyalty [35]. Our measurements of the CLV drivers are based on the measurement of customer satisfaction and customer loyalty in [66]. The measurements in these two papers are designed for M-commerce and banking industries, respectively, and are modied to t the mobile data services in this paper. For details, please see Appendix 1. 4.2.2 The measurement of CLV components We measure customer revenue by their average monthly spending on mobile data services. Moreover, we measure customer relationship duration time by future relationship time. The data of the two variables is collected from questionnaire. We use Cronbachs Alpha reliability to measure the reliability of the questionnaire. In our dataset, the Cron- bachs Alpha values of customer satisfaction and customer loyalty are found to be .773 and .741 with the Chinese sample and .925 and .838 with the American sample, respectively (for details please see Table 8 in Appendix 2). All Cronbachs Alpha values exceed the threshold value of .7, which suggests that the proposed model has acceptable psychometric properties [74]. We performed conrmatory factor analysis (CFA) to assess the validity of the measurements. We ran two sep- arate measurement models, grouping related constructs. The rst CFA grouped items measuring customer satis- faction, the second was the customer loyalty. The t indi- ces presented in Table 8 in Appendix 2 indicate that the models t the data well in both samples. All item stan- dardized loadings for each construct were signicant (P\.001), which supports the dimensionality of the constructs. 5 Data analyses and hypotheses testing 5.1 Assessment of model t To test the models effectiveness, we apply it to the China sample, the US sample, and the total sample, respectively. Tests were done using the AMOS 17.0 software. For the Chi-square is very sensitive to the sample size, number of items and number of factors in the model [8, 9], other t indices, such as goodness-of-t index (GFI), adjusted goodness-of-t index (AGFI), root mean square of approximation (RMSEA), and Comparative Fit Index (CFI) were used to assess overall model t. These results are reported in Table 2. In general, all these results suggest that our model ts the data well (see Table 2). 5.2 The hypothesis testing for whether customer satisfaction and customer loyalty are drivers of CLV or not H4, H5 We use structural equations to analyze the relation between national culture and its impact on CLV, according to the theoretical conceptual model in Fig. 2. The AMOS17 software was used. Table 2 Evaluation indicators of the model Indicators Reference value References China-sample model US-sample model Total-sample model GFI [.9 Hooper et al. [48] .957 .968 .972 AGFI [.7 .926 .939 .949 CFI [.9 .926 .982 .970 RMSEA \.08 .077 .064 .063 288 Inf Technol Manag (2012) 13:281296 1 3 Table 3 presents the analysis of the relationships among different variables in the conceptual models. The three models are quite consistent: all the relations are signicant (P\.001), except for those between customer satisfaction and customer direct revenue and between customer satis- faction and customer relationship duration. Based on this observation, we modify the model as shown in Fig. 2. After the modied model in Fig. 2 is analyzed, we present the path coefcients in the structural equation models in Table 4. 5.2.1 Customer satisfaction as a driver of CLV (H4a, H4b) On the one hand, the path coefcientsChina-sample model: -.169, US-sample model: -.068, Total-sample: -.058 (see the second line in Table 4)show that the relationship between customer satisfaction and customer revenue contribution is slightly negative, but not signi- cant, in all three samples. On the other hand, the data analysis of the path coefcientsChina-sample model: -.142, US-sample model: -.144, Total-sample: -.096 (see the third line in Table 4)show that the relation between customer satisfaction and customer relationship duration is also negative, but still not signicant, in the three samples. Therefore, we cannot conclude that cus- tomer satisfaction is a driver of CLV. 5.2.2 Customer loyalty as a driver of CLV (H5a, H5b) The path coefcients of the relationship from customer loyalty to customer revenue China-sample model: .343, US-sample model: .348, Total-sample: .175 (see the fourth line in Table 4)show that the relationship between cus- tomer loyalty and customer direct revenue is signicantly positive. It is supported that customer loyalty is a driver of customer revenue. The path coefcients of the relationship from customer loyalty to customer relationship duration China-sample model: .556, US-sample model: .664, Total- sample: .584 (See the fth line in Table 4)show that the relationship between customer loyalty and customer life cycle is signicantly positive. This means that customer loyalty really is a driver of customer relationship duration. Fig. 2 Modied theoretical conceptual model Table 3 Correlation analysis of the variables in the conceptual model Relations between variables Correlation P value in the China-sample model P value in the US-sample model P value in the total-sample model Signicance Customer satisfaction and customer loyalty Positive correlation *** *** *** Signicant Customer satisfaction and relationship duration Negative correlation .074 .032 .036 Not signicant Customer loyalty and relationship duration Positive correlation *** *** *** Signicant Customer loyalty and customer revenue Positive correlation *** *** .013 Signicant Customer satisfaction and customer revenue Negative correlation .037 .335 .225 Not signicant ***: signicant at the 0.001 level for a two-tailed test Table 4 Path coefcient for the three samples Path China-sample model US-sample model Total-sample model Signicance Customer satisfaction ? customer loyalty .749 .775 .731 Signicant Customer satisfaction ? customer revenue -.169 -.068 -.058 Not signicant Customer satisfaction ? relationship duration -.142 -.144 -.096 Not signicant Customer loyalty ? customer revenue .343 .348 .175 Signicant Customer loyalty ? relationship duration .556 .664 .584 Signicant Inf Technol Manag (2012) 13:281296 289 1 3 Consequently, we can say that customer loyalty is a driver of CLV. 5.3 The hypothesis testing for the moderating effect of nationality H1, H2, H3, H4a, H4b, H5a, H5b 5.3.1 Independent sample t test and related hypothesis testing-H1-H2 In order to test the differences in the variables between American and Chinese customers, we performed the t test. The results are shown in Table 3. The signicance levels of all the variables in Table 5 are \.01, indicating the dif- ferences of satisfaction and loyalty between the two groups are signicant. The difference of customer satisfaction between the Chinese customers and the American customers (H1) A more detailed analysis in Table 1 shows that Chinese customers satisfaction mean score (-.064) is signicantly lower than that of the American consumers (.082). Moreover, standard deviation of Chinese customers sat- isfaction is .888, signicantly lower than that of the American customers (1.122). Thus, H1 is supported, which holds that the satisfaction of the Chinese consumers in the collectivist culture shows a more moderate trend than the American customers for using mobile data services. The difference in customer loyalty between the Chinese customers and the American customers (H2) The mean loyalty score is .092 for American customers and - .072 for the Chinese customers. This supports H2. Addi- tionally, we can see the customer loyalty standard devia- tion of American customers (1.102) is signicantly higher than Chinese customers loyalty standard deviation (.906), which means the American customers show larger differ- ence on their customer loyalty to mobile data services than the Chinese customers do. 5.3.2 Multi-group SEM analysis of related hypothesis testing: H3, H4a, H4b, H5a and H5b To test the moderating effect of nationality, i.e. the H3, H4a, H4b, H5a and H5b, we conducted multi-group structure equation model (Multi-Group SEM) [48, 95]. The objective of multi-group simultaneous path analysis is to determine whether the path coefcients between CLV drivers and the related variables were equal across different countries. For H3 to H5b, the sample is divided into two subgroups according to the nationality. We rst constrained the paths to be invariant across the two countries and then freely estimated these paths. If the Chi-square change between the above constrained and unconstrained multi-group SEM is statistically signicant, it means the path loadings in dif- ferent industries are signicantly changed. That is, nationality type is a signicant moderator to the relation- ships between CLV driver and related variables. For the unconstrained multi-group analysis, we assume the corresponding path coefcients from CLV drivers to CLV components in the two sample models (the China model and the US model) are statistically equivalent. Then we do multi-group invariance test using the software AMOS17, we get the Table 6. It is shown that Dv = 17.750,which is non-signicant at the level of P\.05. That is to say that the study does not pass the multi-group invariance test. In other words, there are sig- nicant difference between the China model and the US model. Table 7 shows the results of Multi-group SEM analysis. As we can see, for H3, the Chi-square change (92 with 61 df) is 3.395, which is not signicant at the .05 level, so H3 is not supported. That is, the positive relation between customer satisfaction and customer loyalty is not much stronger for American customers than for Chinese cus- tomers. H4a was tested using the same method. We divided the sample into two subgroups, Chi-square change (92 with 61 df) is 3.477, which is not signicant at .05 level, so H4a is not supported. Other hypothesis, H5a, H5b are Table 5 T test results and differences between China and the United States t test of the mean equation Nation Mean SD T Df Sig. Satisfaction -2.877 1,561 .004 China -.064 .888 USA .082 1.122 Loyalty -3.237 1,561 .001 China -.072 .906 USA .092 1.102 Table 6 Multi-group invariance test (assuming model unconstrained to be correct) Model df CMIN P NFI Delta-1 IFI Delta-2 RFI rho-1 TLI rho2 Measurement weights 5 17.750 .003 .003 .003 -.002 -.002 290 Inf Technol Manag (2012) 13:281296 1 3 tested by using the same method. Here, H5a is supported where the Chi-square change (92 with 61 df) is 9.565 and the P value is .002 which is signicant at .05 level; H5b is not supported where the Chi-square change (92 with 61 df) is .563 and the P value is .453. Therefore, except for the positive relationship between customer loyalty and cus- tomer revenue, all the other relationships between CLV driver and related variables do not differ between China and the US, which means NEF has a partially moderating effect in this study. That is, the positive relationship between customer loyalty and customer revenue is signif- icantly stronger in the US than in China as the consumption of mobile data services are involved. 6 Discussions In the Introduction section, we raised three questions that we want to address with our research. After collecting and analyzing data from mobile data service customers both in the US and in China, we are now in a position to answer them. 6.1 Are customer satisfaction and customer loyalty drivers of CLV (H4a, H4b, H5a, H5b)? The answer is partly yes and partly no. From our data analysis, all three samples (China sample, US sample and the total sample) give a consistent conclusion that, in the consumption of mobile data services, customer satisfaction is not a driver of CLV while customer loyalty is. What is the role of customer satisfaction exactly? Our study supports the opinion that satised customers are not necessarily more protable in Ref. [89]. Although customer satisfaction does not directly inuence relationship duration and customer revenue, it indeed has some indirect effects on CLV. From our data analysis, customer satis- faction has positive effect on customer loyalty while cus- tomer loyalty has positive effects on CLV, which means the impact of customer satisfaction on CLV is mediated through customer loyalty. The indirect effect of customer satisfaction on relationship maintenance and development is also proved by [2, 4]. Our study also conrms customer loyaltys positive direct effect on CLV. Although Reinartz and Kumar [85] state that loyal customers are not always protable, Meyer- Waarden [72] proves the positive relation between cus- tomer loyalty and customer protability. Our study also approves the positive direct effect of customer loyalty on CLV. This provides a counter-example to Dowling and Marks [25] claim that the positive effects of customer loyalty on customer revenue and customer relationship lifetime do not exist for highly innovative new products, and products success depends on fads and fashions. Our study indicates that, although mobile data services are updated in an increasingly faster pace, and have become more and more fashionable, they still follow the rule in most industries that higher customer loyalty cause higher CLV. 6.2 Does NEF inuence the effect of various drivers on CLV components (H1, H2, H4a, H4b, H5a and H5c)? The answer is still partly yes and partly no. NEF does moderate customer satisfaction and customer loyalty, while for the relationships between CLV drivers and their related variables, only the positive relationship between customer loyalty and customer revenue is moderated by NEF, all the other variable relationships are not moderated by NEF. Table 7 The results for multi-group SEM Path and hypothesis Indices v 2 GFI CFI RMSEA df Dv 2 P Signicance Customer satisfaction ? H3 Customer loyalty 307.809 .962 .963 .051 61 3.395 .065 Not signicant Customer satisfaction ? H4a Customer revenue 307.891 .962 .963 .051 61 3.477 .062 Not signicant Customer satisfaction ? H4b Relationship duration 304.545 .962 .964 .051 61 .131 .718 Not signicant Customer loyalty ? H5a Customer revenue 313.979 .961 .963 .052 61 9.565 .002 Signicant Customer loyalty ? H5b Relationship duration 304.977 .962 .964 .051 61 .563 .453 Not signicant Inf Technol Manag (2012) 13:281296 291 1 3 Our study strongly supports that Chinese culture mod- erate Chinese customer satisfaction assessment. On the one hand, the Chinese people tend to keep the relation har- mony, they will avoid extreme explicit conict; on the other hand, the Chinese people are in high communication context, they will also avoid speak highly of praise for things or persons. The relatively low customer satisfaction level (-.064) and the relatively smaller standard variance (.082) of customer satisfaction from the China sample indicate the Chinese cultures role on the customer behavior. Our study also proves the American cultures effect on American customers satisfaction and loyalty. The indi- vidualism and lower communication context make the Americans speak out their real assessments explicitly in most cases and do not care about any direct conicts. As for customer satisfaction and customer loyalty, this is embodied in the relatively larger standard variance of customer satisfaction (1.122) and customer loyalty (1.102) compared with the counterparts in China. Furthermore, the lower uncertainty avoidance of American culture encour- ages American customers to accept new innovations, which is benecial to higher customer satisfaction (.082) and higher customer loyalty (.092). Our data analysis indeed demonstrates this point. Our study nds that the positive effect of customer loyalty on customer revenue is much more obvious in the US than in China. Cyr [22] gives some support to our research result. Taking Canada, Germany and China as the cross-cultural background for the investigation of website design, Cyr [22] discovers that trust has greater effect on customers behavior in China than in Canada for the high uncertainty avoidance in China while the low uncertainty avoidance in Canada. Trust should be an important mod- erator to be considered for the cross-cultural consumer research between western culture and eastern culture. It is expected that customer trust in uncertainty avoidance maybe moderate the relationship between customer loyalty and customer revenue. For more assertion, further study is needed. Our study does not nd evidences that NEF can moderate the effect of customer loyalty on customer lifetime duration. Although our study has proved cus- tomer loyalty to be a driver of customer relationship duration, data analysis from China and the US shows no difference on customer loyalty and customer lifetime duration between the two countries. This conclusion supports Baalbaki and Malhotra [3] and Meffert and Bolz [71] who believe that the consumption of high-tech or digital products has little relevance to national culture. 6.3 As for China and the US, what are the key factors to enhance CLV, respectively (H4a, H4b, H5a and H5c)? Our study discovers that for both China and the US, the most important aspect in enhancing CLV in the con- sumption of mobile data services is customer loyalty. But, due to the different national culture characteristics between China and the US, the ways to foster customer loyalty should be different. Chinese culture advocates collectivism and human relationship network. Therefore, Chinese customers rely more on informal communication channels to disseminate product and service information. Once a Chinese cus- tomer becomes loyal to certain products or services, he/ she is willing to share his/her experience with the people around, hoping to create group identity and social value. Our recommendation is that in a collectivist culture environment such as the Chinese one, rms can benet signicantly by focusing on and maximizing its custom- ers positive word-of-mouth (WOM). Additionally, China is also a high uncertainty avoidance and long-term ori- entation country, so the carriers should have the patience to spend much longer time to win customer trust and spend more effort on customer service, in order to win customer loyalty. The culture of the US is identied by individualism, low uncertainty avoidance, low communication context and short-term orientation. Therefore, our recommendation is that in a western culture environment, such as in the US, mobile data service providers should focus on developing novel, abundant, personalized, fashionable and useful mobile data services to increase customer loyalty and to maximize CLV. 7 Limitations and future research In this article, we aim to identify whether customer satis- faction and customer loyalty are CLV drivers and to explore how to enhance a rms CLV from the perspective of cross cultural comparison research. Taking China and the US as the representatives of eastern and western cul- tures, and analyzing mobile data service usage in these two countries, our study conrms that customer satisfaction is not a driver of CLV, but customer loyalty is; nationality is partially a signicant factor in CLV enhancement and should be considered in the formation of a rms marketing strategy with respect to CLV. Our study is the rst cross-cultural study on CLV, and as such, it has some limitations. First, we focus on customer 292 Inf Technol Manag (2012) 13:281296 1 3 satisfaction and customer loyalty as the CLV drivers. In future research, we hope to continue and complete this analysis by including other factors such as customer trust and customer commitment. Second, since our dataset is collected mainly through questionnaire survey, it only contains user information. We do not have access to information from carriers and service providers. In future research, we will try to get the help from carriers and services providers and obtain users actual usage data of mobile data services. That way, we can calculate CLV more precisely and build quantitative model between CLV drivers and CLV directly. Acknowledgments This paper was supported by the National Natural Science Foundation of China (Grant No.: 71171023, 70701005, 70911120262), Major State Basic Research Development Program of China (973 Program) (No. 2012CB315805), Program for Excellent Talents in Beijing University of Posts and Telecommuni- cations, Beijing Municipal Natural Science Foundation (Project No. 9122018), Program for New Century Excellent Talents in University (Program No.: NCET-10-0241), and the Open Research Fund between Beijing University of Posts and Telecommunications and IBM (Grant No. JLP200906011-3). The diligent work by graduate students Lei Peng and Fang Liu from School of Economics and Management, Beijing University of Posts and Telecommunications, Beijing, China, are greatly appreciated. We are also grateful to Dr. Robert W. Palmatier of the Marketing and International Business Department, Foster Business School, University of Washington, Seattle, USA, for his many helpful suggestions. We should also say our thanks for Dr. Aihua Zhang of the School of Economics and Management, Beijing University of Posts and Telecommunications, Beijing, China, who helped with the research survey in China. Appendix 1: Measurement The following statements are evaluated on a scale of 17 which represents the level of agreement with the statement: Strongly disagree (1), disagree (2), slightly disagree (3), neutral agree (4), slightly agree (5), agree (6), and strongly agree (7). SAT1. Overall, I am satised with the mobile data services I am using SAT2. Using mobile data services has met with my expectations SAT3. I am pleased with the experience of using mobile data services SAT4. My decision to use mobile data services was a wise one LOY1. My preference for using mobile data services would not change LOY2. It would be difcult to change my beliefs about mobile data services LOY3. I will continue using mobile data services in the future LOY4. Even if friends recommended that I give up using mobile data services, my preference for mobile data services would not change Appendix 2: Reliability and validity of the measurements See Tables 8, 9. Table 8 Reliability analysis of the measurements for CLV drivers Country Variable Measuring statement Correlation coefcient between the statement and the total Cronbachs alpha if item deleted Cronbachs alpha based on standardized items China Customer satisfaction A1 .621 .694 .773 A2 .633 .689 A3 .589 .711 A4 .465 .775 Customer loyalty A5 .552 .671 .741 A6 .499 .701 A7 .524 .687 A8 .560 .666 US Customer satisfaction A1 .827 .902 .925 A2 .874 .886 A3 .869 .888 A4 .737 .932 Customer loyalty A5 .713 .776 .838 A6 .648 .806 A7 .631 .813 A8 .694 .785 Inf Technol Manag (2012) 13:281296 293 1 3 References 1. Atuahene-Gima K, Li H (2002) When does trust matter? Antecedents and contingent effects of supervise trust on per- formance in selling new products in China and the United States. 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