ABSTRACT

Title of Dissertation: THE ROLE OF COMMITMENT IN THE

RELATIONSHIP BETWEEN CUSTOMER
SATISFACTION AND CUSTOMER
LOYALTY IN BANKING INDUSTRY:
MEDIATING EFFECT OF COMMITMENT

Hung-Hsin Ho, Doctor of management, 2009

Dissertation Directed By: Professor, Saad Laraqui,

University of Maryland University College
Graduate School of Management &
Technology

Competition of Taiwan banking market is severe. Relationship marketing plays an important role

for Bank‘s competence. The customer satisfaction towards the bank products or service just a

starting point in the building of long-term relationship with the banks. The major factors that

determine the success of the relationship marketing are the customer loyalty. However, the

central issue is how to transfer the customer satisfaction to the loyalty. Through the literature

review on customer relationships, we realized the psychological and physical factors of the

commitment behind customer loyalty might play the mediating role. A conceptual model is

established that the commitment transfers the customer satisfaction to the loyalty. In this model,

the components of customer satisfaction-service quality and attractiveness of alternatives

influence loyalty are tested to influence the components of commitments -affective and

continuance commitments respectively. Then an empirical research among 317 bank customers

of Taiwan was conducted to test the conceptual model. The results are gathered from a street
interview-survey in the central cities of Taiwan, and show that commitment is a crucial

mediator in nurturing customer loyalty from the satisfied customers. Since promoting

customer loyalty is a paramount issue for banks, this paper is believed to make a marginal

contribution for Taiwan Banks.

 THE ROLE OF COMMITMENT IN THE RELATIONSHIP BETWEEN CUSTOMER
SATISFACTION AND CUSTOMER LOYALTY IN BANKING INDUSTRY: MEDIATING
EFFECT OF COMMITMENT

By

Hung-Hsin Ho

Dissertation submitted to the Faculty of the Graduate School of the

University of Maryland University College, in partial fulfillment
of the requirements for the degree of
[Doctor of management]
[2009]

Advisory Committee:
[Professor, Saad Laraqui], Chair
[Professor, James D. Wood ]
[Professor, Murray Millson]
 UMI Number: 3494537

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[Hung-Hsin Ho]
[2009]
Dedication

To my parents

ii
 Acknowledgements

Firstly, I would like to thank my doctoral committee: James D. Wood, Ph.D. and Murray Millson,
Wood, Ph.D.; and my advisor, Saad Laraqui, Ph.D., with whom I was honored to work with
during the past years.
Secondly, I would like to thank my colleague, Jenny Cho, without your help, this research would
not have been possible.
Lastly and most importantly, I would like to thank my beloved wife, Tina, for her constant
support and encouragement that allowed me to concentrate on finishing this study and to my
sweet Jose and J.P.; you are both such an inspiration to me, I am proud to be your father and feel
extremely grateful to have you both in my life.

iii
 Table of Contents

Dedication ....................................................................................................................................... ii
Acknowledgements ........................................................................................................................ iii
Table of Contents ........................................................................................................................... iv
List of Tables .................................................................................................................................. 1
List of Figures ................................................................................................................................. 2
Chapter 1: Introduction and Research Problem .............................................................................. 3
1.1 Presure in banking industry .................................................................................................. 3
1.1.1 Accelerating information technology innovations ......................................................... 3
1.1.2 High competition in banking industry ........................................................................... 4
1.1.3 Increasing sophistication of customers .......................................................................... 5
1.2 Introduction of relationship marketing: customer satisfaction and customer loyalty ........... 6
1.3 The status of customer loyalty in banking industry .............................................................. 8
1.4 The need of commitment in banking industry .................................................................... 10
1.5 Research Objectives ............................................................................................................ 13
1.6 Chapter division .................................................................................................................. 14
Chapter 2: Literature Review ........................................................................................................ 17
2.1 Relationship marketing ....................................................................................................... 17
2.1 1 Concept of relation marketing ..................................................................................... 17
2.1.2 Development of Relationship Marketing ..................................................................... 18
2.1.3 Benefits of relationship strategies ................................................................................ 19
2.1.4 Role of Commitment for relationship marketing ......................................................... 21
2.2 Customer satisfaction .......................................................................................................... 22
2.2.1 Concept of customer satisfaction ................................................................................. 22
2.2.2 Measurement of customer satisfaction......................................................................... 24
2.2.2.1 Dimensions ............................................................................................................... 25
2.2.2.2 Measurement ............................................................................................................. 26
2.3 Customer loyalty ................................................................................................................. 27
2.3.1 Concept of customer loyalty ........................................................................................ 27
2.3.2 Categories of customer loyalty .................................................................................... 30
2.3.3 Meaning of customer loyalty for banking industry...................................................... 31
2.4 Relationship between customer satisfaction and customer loyalty..................................... 33
2.4.1 Complexity of the relationship between customer satisfaction and customer loyalty . 33
2.4.2 Mediating factors in the relationship of customer satisfaction and loyalty ................. 35
2.4.2.1 The main groups of mediating factors ...................................................................... 36
2.4.2.2 The nature of relationship ......................................................................................... 37
2.4.2.2 Alternatives in the relationship of customer satisfaction and loyalty ....................... 38
2.5 Service quality .................................................................................................................... 39
2.5.1 Concept of service quality ........................................................................................... 39
2.5.2 Relational Benefits of Service Quality ........................................................................ 40
2.5.3 Measuring Service Quality .......................................................................................... 42
2.6 Commitment ....................................................................................................................... 44
2.6.1 Concept of commitment ............................................................................................... 44

iv
 2.6.2 Dimensions of organizational commitment ................................................................. 45
2.6.2.1 Affective commitment .............................................................................................. 46
2.6.2.2 Calculative or continuance commitment .................................................................. 47
2.6.2.3 Normative commitment ............................................................................................ 47
2.6.2.4 Relationships among the three dimensions ............................................................... 48
2.7 Dual foci of commitment .................................................................................................... 50
2.7.1 Organizational commitment......................................................................................... 52
2.7.1.1 Concept ..................................................................................................................... 52
2.7.1.2 Antecedents ............................................................................................................... 53
2.7.2 Commitment of the employee to customers- ‗Commitment-trust‘ theory in relationship
marketing .............................................................................................................................. 55
2.8 Nature of commitment ........................................................................................................ 59
Chapter 3: Conceptual Framework and Research Method ........................................................... 63
3.1 Research Setting.................................................................................................................. 63
3.2 Research design .................................................................................................................. 65
3.3 Research model ................................................................................................................... 65
3.4 Measures of constructs ........................................................................................................ 69
3.4.1 Measurement of customer satisfaction......................................................................... 70
3.4.2 Measurement of attractiveness of alternatives ............................................................. 71
3.4.3 Measurement of affective commitment ....................................................................... 72
3.4.4 Measurement of continuance commitment .................................................................. 73
3.4.5 Measurement of customer loyalty................................................................................ 74
3.5 Questionnaire design ........................................................................................................... 75
3.6 Pilot survey ........................................................................................................................ 77
3.6.1 Feedbacks of participants ............................................................................................. 78
3.6.2 Modification of questionnaires .................................................................................... 79
3.7 Composition of constructs .................................................................................................. 80
3.8 Suggested Moderator Variables of the Relationship between Satisfaction and Loyalty .... 81
3.9 Sampling method ................................................................................................................ 83
3.10 Sample size ....................................................................................................................... 85
3.11 Data collection .................................................................................................................. 85
3.12 Coding of demographics ................................................................................................... 87
3.13 Primary manipulating of data............................................................................................ 88
3.14 Reliability and validity analysis ........................................................................................ 88
3.15 Statistical test used ............................................................................................................ 90
Chapter 4: Discussion, Results and Conclusions .......................................................................... 93
4.1 Variables analysis ............................................................................................................... 93
4.1.1 Descriptive statistics .................................................................................................... 94
4.1.2 Assessing Normality .................................................................................................... 95
4.1.3 Correlation Test ........................................................................................................... 96
4.2 Hypothesis Testing............................................................................................................ 100
4.2.1 Test of Hypotheses 1 and 2 ........................................................................................ 101
4.2.2 Test of Hypotheses 3 and 4 ........................................................................................ 105
4.2.3 Test of Hypotheses 5 .................................................................................................. 107
4.2.4 Test of Hypotheses 6 and 7 ........................................................................................ 108
4.2.5 Summery .................................................................................................................... 111

v
 4.3 Analysis for the moderating variables- Demographics ..................................................... 114
4.3.1 The distribution of variables of demographics .......................................................... 114
4.3.2 Gender Summery ....................................................................................................... 115
4.3.3 Age Summery ............................................................................................................ 115
4.3.4 Education level summery........................................................................................... 116
4.3.5 Job status summery .................................................................................................... 116
Subsection 4.3.6 Annual income summery......................................................................... 117
4.4 Exploration of commitment‘s role between groups .......................................................... 118
4.4.1 Age/gender factors ..................................................................................................... 118
4.4.2 Education factors ....................................................................................................... 120
4.4.3 Job status factors ........................................................................................................ 123
4.4.4 Annual income factors ............................................................................................... 123
4.5 Conclusion ........................................................................................................................ 124
Chapter 5: Recommendations for Future Work ......................................................................... 128
5.1 Practical Implication ......................................................................................................... 128
5.1.1 Managerial Implications ............................................................................................ 128
5.1.2 Recommendation for enhancing affective commitment ............................................ 131
5.1.3 Recommendations of Morgan and Hunt‘s theory ...................................................... 133
5.2 Limitation .......................................................................................................................... 134
5.3 Further research ................................................................................................................ 135
Appendix A: Questionnaire ........................................................................................................ 138
Appendix B: Reliability and validity test................................................................................... 145
Appendix C: Frequency and statistics of demographics ............................................................. 146
Appendix D: Demographic variances regression analysis.......................................................... 150
Appendix E: regression analysis of five constructs ................................................................ 169
References ................................................................................................................................... 195

vi
 List of Tables

Table 3.1: Composition of constructs………………………………………………………….79

Table 3.2: Locations, quota and cases of the survey………………………………..………….84
Table 3.3: Reliability and validity test of full samples…………………..……………..……….88
Table 4.1 Statistics of five constructs..………………………..………...……………..……….93
Table4.2: Correlation analysis of the five constructs ……..………...………………..………. 97
Table 4.3: The guidelines for assessing the relationship………………………………………..97
Table 4.4 ANOVA for The roles of affective commitment and continuance commitment of
building customer…………………………………………………………………..104
Table 4.5 Hypotheses Matrix……………………………………………………………….....109
Table 4.6 Statistics of Demographics…………………………………………………………112
Table 4.7 Frequency of gender …………………………………………………………….…113
Table 4.8 Frequency of age……………………………………………………………………113
Table 4.9 Frequency of education………………………………………………………….…114
Table 4.10 Frequency of Job status……………………………………………………………115
Table 4.11 Frequency of annual income……………………………………………………….115
Table 4.12 Tests of Between-Subjects Effects……………………………………………..…..117
Table 4.13 ANOVA between- groups and within groups sums of squares……………………119
Table 4.13 Descriptive on continuance commitment and affective commitment………..……120
Table 4.14 ANOVA analysis continuance commitment and affective commitment…………..122

1
 List of Figures

Figure 3.1 Research model…………………………………………..………………………….64

Figure 4.1 The scatter plot of the correlation between the average affective commitment of
banking service and average service quality………………………………………. 101
Figure 4.2 The scatter plot of the correlation between the average affective commitment of
banking service and average attractiveness of alternatives………………………….102
Figure 4.3 The scatter plot the three correlations among the three variables (affective
commitment, continuance commitment and customer
loyalty)……………………………………103
Figure 4.4 The scatter plot of the correlation between the affective commitment of banking
service and continuance commitment……………………………………………….106
Figure 4.5 The scatter plot the three correlations among the three variables (service quality,
attractiveness of alternatives, and customer loyalty)……………….…………….…108
Figure 4.6 Research model with p-value………………………………………………..……..111
Figure 4.7 The relationship between age/ gender and affective commitment………….….….118
Figure 4.8 The relationship between education level and continuance commitment…..….…121
Figure 4.9 The relationship between education level and affective commitment……………121
Figure 4.10 The relationship between annual income and continuance commitment….……122
Figure 4.11 The relationship between annual income and affective commitment……………123

2
 Chapter 1: Introduction and Research Problem

1.1 Presure in banking industry

1.1.1 Accelerating information technology innovations

In the first place, information technology has greatly changed the faces of bank products and
quality of service in a wide range, which is seen as revolution in the banking industry. For
example, through ATMs and EFTPOS, people could make transactions without time and
geography limitations; the processing of the vouchers and other financial documents, since they
would be transmitted as the electronic image directly to the customer, rather than being moved to
a centralized processing area physically; ‗Interactive Voice Response‘ (Malhotra & Mukherjee,
2003) allows customer enquiries such as account balances to be automated over the telephone;
again, the assessment of consumer loan applications is being automated by credit scoring system.

The most exciting things happened in the new distribution technologies, which have much
influence on the customer cognitive aspect1. Stored value cards and electronic purses refillable
through an ATM or over the telephone, are increasing popular and gradually substitute for cash
and checks recently; the interactive television with electronic banking capability has been
introduced as ‗information superhighway‘. Such technology means it will be possible to do the
banking or the shopping from home, by telephone or computer. These sophisticated sales and
service technologies can not only drive down costs but also speed up the delivery. More
importantly, they might design and model products options according to the customers‘ specific
needs and eventually generate more consistent decision-making 2of customers.
(MarketWatch: Financial Services, 2007)

1
Generally, there are two aspects existing in customers’ reaction, that is, cognitive and non-cognitive aspects.
Cognitive aspects means something immaterial (as a circumstance or influence) that contributes to producing a
result( Wordwebonline, 2009); in banking context, it refers to an information processing view of an individual’s
psychological functions for specific banking service.
2
Decision marketing process means a sequence of steps that should lead to best solution, optimising decision-
makers’ utility (Teisman, 2000).

3
Therefore, the advancing information technology innovations push the financial services
companies to improve their understanding of customers‘ needs and purchasing behavior in order
to be able to ‗establish database and management systems aimed at delivering tailored services‘
(Xu, Goedegebuure, &Van der Heijden, 2006, p.81).

However, any innovations in financial services companies are easy to be imitated by competitors,
which intensify the competition within financial services industry. The major external force is
the internationalization of almost all financial products and participators (Xu et al., 2006). The
customers of banking industry sooner or later will be introduced any innovations technology.
That means the physical changes in the banking- related technology cannot be differential factors
to win competitive advantage and customer loyalty in the long run.

1.1.2 High competition in banking industry

The change in the regulatory environment, especially some deregulations is removing many
barriers to open competition, and has led to the appearance of new entrants and new breeds of
competitors.

Over years, across a whole range of traditional banking services, a great amount of competitors
are coming forth and they try to develop a significant and fine understanding of customer
segmentation and the relationships between profitability and customer values. (Mercer, 1996)

By identifying where they can deliver services more efficiently, these new competitors are
exposing and moving into high profit niches used by banks to support ‗cross-subsidization‘
(Mercer, 1996) of unprofitable activities. With electronic delivery of banking services, these new
competitors don‘t need extensive branch networks, and thus have lower cost bases. That makes
the entry barrier of banking industry become lower, which enhance the original competition.
Given that, customers might raise their expectation for banking service and easily switch their
banks.

4
 1.1.3 Increasing sophistication of customers

However, the key pressure driving structural change in banking industry is: the increasing
sophistication3 of customers, and their increased expectation4 in terms of service. With the
increasing globalization, such issue applies in the global context.

Customers are growing in sophistication, because they are increasingly comfortable with
information technologies that they are financially literate (Mercer, 1996). With more busy lives,
people tend to want and expect convenience of a high standard, in each area of social life
including banking sector. As a result, consumers are becoming more sophisticated in their
requirements and they are increasingly demanding higher levels of service.

With the more intense competition, customers trended to be more mobile and demanding.
Eventually they are more likely to switch their banks, facing more available choices than before.
If some bank fails to deliver in terms of service or value even meet specific needs, the customers
might simply go elsewhere. That is truth in a competitive financial services sector. In a word,
customers expect better, faster, service and advice increasingly; and consequently the customer is
the focus and customer service is the differentiating factor to win competitive advantages.

Therefore, the role of banks as financial intermediaries and the delivery of banking service value
are facing more challenges than before. Therefore, a basic re-positioning and re-engineering5 of
banks is in progress in the global banking industry currently.

3
Sophistication is ‗The process or result becoming more cultured, knowledgeable and disillusioned‘ (Merriam-
webster, 2009).
4
With the technology improvement, customers have more knowledge, less time and less switching cost. Then their
expectation for the service is always high increasingly.
5
‗Reengineering is radical redesign of an organization's processes, especially its business processes. Rather than
organizing a firm into functional specialties (like production, accounting, marketing, etc.) and considering the tasks
that each function performs; complete processes from materials acquisition, to production, to marketing and
distribution should be considered. The firm should be re-engineered into a series of processes. It can be applied for
banking industry. ‘(economicexpert, 2009) http://www.economicexpert.com/a/Reengineering.html

5
1.2 Introduction of relationship marketing: customer satisfaction and customer loyalty

Berry (1983) defined relationship marketing as based on acquiring, maintaining and enriching
customers‘ relationships in an organization. Relationship marketing is an increasingly important
ability for enterprises operating in the competitive market.

There are obvious customer benefits connected with relationship marketing approach (Hennig-
Thurau, Gwinner, & Gremler, 2002). According to Turnbull & Valla‘s(1990) research,
customers are inclined to fill the gap between the customer expectation and actual service quality
(Harrison, 2000), when they are engaged with service suppliers in certain affective relationship;
moreover, with continuous deregulation that heighten the competition in the banking industry.
Therefore, relationship marketing is introduced in this paper, as a means to maintain customer
satisfaction and win customer loyalty, which can fill the gap in the service quality.

Customer satisfaction and customer loyalty is the most important constructs in the field of
relationship marketing. To clarify the impact of commitment on these two constructs, we should
discuss the meaning and nature of them.

Customer Satisfaction can be seen as meeting customers‘ expectations in general. According to

MacNealy, customer satisfaction is referred to ‗delight customers delivering a service or product
that goes far beyond customers‘ expectations‘ (MacNealy, 1994, p.14). In particular, the genuine
and ongoing satisfaction is the most valuable asset owned by service providers (Engel, Blackwell,
& Miniard, 1995).

Oliver (1999) has defined customer loyalty as strong emotional reflection to keep re-purchase
behaviors and then maintain a long-term relationship with certain organizations. In many
literatures in relationship marketing, customer loyalty has replaced market share as the primary
focus of marketing practitioners (Gummesson, 1994), since the customer loyalty could be a
weighty consequence for the sustainable strategies of companies while the market share usually
indicates the marketability during a specific time (Reichheld, 1993).

6
If customers are satisfied with the service, usually they will continue to defect if they believe
they can get better value, convenience or quality elsewhere (Yeshin, 2006). Otherwise, if their
needs are met or exceeded, they are inclined to maintain the relationship with the service
provider.

Given that, in different service industries context, a great number of researches have revealed
that retaining customer satisfaction, reducing switching behaviors and then keeping customer
loyalty might result in higher profitability (Palihawadana & Barnes, 2004). Accordingly, there is
increasing attention paid in practical world on the management of customer relationships
(Kuenzel & Krolikowska, 2008).

From McIlroy and Barnett‘s research (2000), the high level of customers‘ satisfaction usually is
a base of loyal customers. Consequently, customer satisfaction is seen as the foundation for
every company wishing to increase customer loyalty and thereby create a better business
performance.

However, since customer satisfaction of product and service quality is not the only factor 6
inducing the customer loyalty, satisfaction is necessary but not sufficient for the achievement of
customer loyalty (Sharma, 2007). Hotchkiss (1995) found where consumers can be highly
satisfied but still defect their service providers. Therefore, an important issue is that- how can we
transfer the customer satisfaction to loyalty in an effective way? Could the commitment play a
critical role to transfer the customer satisfaction to loyalty? The purpose of this paper is to
answer these questions.

6
Switching barriers might also play a key role for customer retention (Jones, Mothersbaugh, & Beatty, 2000), Gan, Cohen,
Clemes & Chong (2006) argued that competitive advantage, customer value and switching barriers had a significant impact on
customer loyalty, and customer satisfaction is not a major factor to influence consumers‘ decisions to be loyalty to their banks.
For example, considering avoiding the exit costs, quite many customers tend to maintain a relationship with the original service
provider (MarketWatch: Financial Services, 2007).

7
1.3 The status of customer loyalty in banking industry

‗The banking industry sector is characterized by barriers to entry and sunk costs and closely
resembles an oligopolistic industry with a few large, well-established players, as well as some
smaller players’ (Menon and O'Connor, 2007, p. 158).

Customer satisfaction and loyalty towards banking industry is usually more the norm than the
exception, due to the high-level invisibility of banking service. Normally, the achievement of
customer satisfaction or loyalty might generate independently of the existence of some
products/services in banking industry.
Due to the tendency that customers treat their financial services providers for a short time, other
than life-long partners, customer loyalty has gain more and more attention within banking
industry. Therefore, bankers must pay more attention for the change of customer behaviors, and
apply effective strategies in customer acquisition, retention and loyalty, for both short and long
term development.

In Ozimek‘s(2003) investigation, 96 bank executives of ‗UK, France, Germany, Italy, Benelux,

Spain and a Nordic group‘ have been surveyed, in order to generate an analysis of changing
patterns of bank loyalty in each of their markets. The report looks at declining loyalty, which it
concludes is present and declining further wherever there are not structural factors (such as the
supply-demand relationship in banking industry, or deregulation) preventing customer disloyalty.

More recently, branch managers of banks surveyed by Datamonitor cited by ‗MarketWatch:

Financial Services‘ (2007), which revealed that the managers

‗believe that an increase in consumer awareness of financial services products and the growth in
online banking are the principal reasons for customers shopping around more. Almost three
quarters (73%) of UK branch managers attribute customers shopping around more to a rise in
consumer awareness’ (MarketWatch: Financial Services‘ : 2007).

According to Scrivens (1988), customers awarded the ability to perceive, to feel, or to be

conscious of the patterns of certain products/ services, or events. Customer awareness does not

8
necessarily imply understanding; however, it is the necessary stage of the construction of
customer satisfaction and then customer loyalty. In addition, the flowing major factors
contributing in the customer loyalty included an increase in competition between established
players the growth in online banking across Europe as a whole.

Given that, according to the cited survey on banking branch managers (conducted by Data
monitor) also suggest that:

‗customers in the Nordic countries and the UK tend to shop around most, while those in Italy,
Spain and Austria shop around the least. Indeed, according to the survey, 98% of branch
managers in the UK agreed that customers shop around for financial services products more
than they used to a few years ago‘ (MarketWatch: Financial Services, 2007, p.8).

In UK market- the most competitive and developed banking markets globally, customers used to
shopping around for many years, by which they can make real choices and significant savings.

In terms of customers in the Nordics, they, by way of Internet, tend to frequently compare the
prices of products/services with different sources (MarketWatch: Financial Services, 2007).
Over half of Nordic customers are likely to be loyalty to their major service providers. However,
unlike UK, such loyalty results from the lacking of market players in the banking industry,
making the customers lose bargain power and cannot make real choices. Most banking industries
tend to offer products/ services with similar functions, which in fact give customers little choice.

‘The only source of heterogeneity is often the interpersonal banker – customer service
encounters’ (Menon & O'Connor, 2007).

Thus, in many cases, the majority of customers are likely to retain a long-term relationship with a
bank. Unless customers face specific the issue of ‗moving, changes in financial or personal
situation or unambiguously unacceptable service‘ (Menon & O‘Connor, 2007), customer
commitment and the consequent loyalty are likely to be unchanged. Malhotra & Mukherjee
(2003) argue that customer loyalty mainly reflect the barriers the customer experienced

9
previously rather than the effects of customer relationship management (CRM for short).
Commitment that occurs for the reasons mentioned above is limited in its ability to contribute to
a bank‘s success (Malhotra & Mukherjee, 2003).

However, the downtrend of customer loyalty is forecast as ‗a long-term issue for lenders‘
(MarketWatch: Financial Services, 2007, p.8). With the faster European integration process, the
competition among banks might intensify and the issue of customer loyalty might face more
challenge in the future. Although the level of customer loyalty still depends on the market
characteristics (in some countries it showed high level for the structure factors), all markets are
seeing loyalty dropping down. Due to more expensive cost (e.g. acquiring new customers) of
attracting new customers than retaining existing ones, designing complete and practicable
customer loyalty strategies are critical issues.

The declining trend of customer loyalty mentioned above suggests that in fewer cases the
customer satisfaction have been transferred into the customer loyalty. Therefore, promoting a
mediating tool filling such gap has its own realistic significance.

1.4 The need of commitment in banking industry

According to Gounaris, Tzempelikos, & Chatzipanagiotou, (2007), for relationship marketing there
are two main objectives applied in banking context: the first one is that bankers should maintain
loyal customers who contribute the profit to banks; the second is that bankers should provide
continuous product/service with relative high quality, in order to establish customers‘
commitment, and then earn further benefit in turn from these customers. Considering such
objective of relationship marketing, the role of commitment for the relationship between
customers and banks, has been emphasized in practical customer strategies (Restuborg, Bordia,
& Tang, 2006).
Customer Relationship is often measured in point of ‘customer retention (i.e., the longevity of the
customer’s relationship with the marketer), customer share development (i.e., the proportion of
customer purchases in a particular product or service category a marketer can capture), and

10
customer advocacy (ie, generation of word- of- mouth 7referrals’ (Menon & O'Connor, 2007:
157).

Gundlach, Achrol, & Mentzer, (1995) argue that for gaining customer retention, share increase,
and public support, the concept of commitment may become a central point of explanation in
marketing. However, the growth of commitment-related concepts needs more careful
segmentation of commitment‘s theoretical area in regard to the proposed meaning of each
concept and the relationships among them (Kuenzel & Krolikowska, 2008).

The most well known concept for commitment is the three-component typology of commitment
proposed by Meyer & Allen (1987). He integrates the psychological and calculative perspectives
to segment the commitment into three parts, that is, affective, continuous and normative
commitment perceptively.

‗Affective commitment on the other hand implies a customer – marketer relationship driven by
perceptions of reciprocity and trust. It indicates close identification between the customer and
the marketer in terms of shared values and rapport, and may lead to an emotional attachment
between the customer and the marketer‘ (Menon & O'Connor, 2007, p. 159).

Behavioral commitment, also called continuance or calculative commitment, derives from the
cold calculating of potential loss or profit linked with staying or quitting certain relationship.
Considering the difference from the affective commitment, continuance commitment generate
due to the high-level inconvenience or expensive cost of switching (Meyer & Allen, 1991),
instead of affective needs.

Normative commitment is defined, as the relationship derived by consumers‘ moral or obligation

factors. In other words, they ‗ought to‘ keep such relationship. However, among the three

7
‗Word of mouth is a reference to the passing of information from person to person. Originally the term referred
specifically to oral communication. (literally words from the mouth), but now includes any type of human
communication, such as face to face, telephone, email, and text messaging‘(Wikipedia).

11
categories of commitment, only affective and continuance commitment is adopted in the
modeling of this research. The two reasons why normative commitment will be not adopted are
explained as following: one is the nature of normative commitment involve many ethical
elements, which is not exactly suited for the topic; the other is the analysis of normative
commitment will make relationships with affective commitment more complicated (Meyer &
Allen, 1991).

Although both behavioral commitment and affective commitment can be the contributing factors
for the customer loyalty build, according to the Menon & O'Connor‘s report (2007), affective
commitment is more critical and profitable than continuance on customer retention. Taking into
account of the argument of Menon & O'Connor, this paper will examine the different roles of
customers‘ affective commitment and behavioral commitment contributing customer loyalty in
the context of banking services.

Many researchers have taken commitment as the key variable constructing the customer
relationships (e.g. Christopher & Ballantyne, 1991; Brown, 1996; Gruen, Summers, & Acito,
2000). It is found that commitment might considerably decrease the probability of switching
behavior, as a result of a motivation of reducing costs. In addition, it has been found in the
literature that commitment leads to behavioral loyalty (Frow, 2007). In particular, since
customers‘ word-of-mouth recommendations could often bring potential loyalty customers and
to a large degree make profit for banks, bank pay special interest in the relationship of
commitment of behavior loyalty.

The attitudinal component of commitment represents a ‗partisan, affective attachment to the

goals and values of an organization, to one’s role in relation to the goals and values, and to the
organization for its own sake…‘ (Buchanan, 1974, p.533).

In this study, commitment can be referred as the affective and behavior commitment of
customer‘s towards the service value that the banks provide (Farrell, 2003). Building customer‘s
commitment must be based on the previous establishment of employee‘s commitment. If
banking relationship is about linking, affective links are created only when the employees
develop a relationship with the customers (Morgan, 1994). In general, a prerequisite for

12
developing relationships is the satisfaction of the employees themselves. Customers look for a
relationship with the bank when they receive benefits from its services. With the entire banking
focus now moving towards profits and profitability, it is very important that employee attitudinal
commitment becomes a top priority issue for the banking fraternity. When the employee is
committed for the organization goal, the customer will be served well and he will do more
business with banks leading to the profitability of the bank. This benefit is passed on to the
deserving employees and they are motivated. This circle of excellence is of prime importance in
customer centric business processes.

For example, De Ruyter and Wetzels (1999) had conducted a research for auditor–client
relationships in banking industry. They found that ―service quality, trust and interdependence
were positively related to commitment”; in addition, the antecedents and outcomes of
commitment should be investigated further. The level of commitment‘s effect on the increase of
customer loyalty is difficult to be measured in the background of banking services. However,
from relationship marketing strategies the banks invested, we still easily find a positive
relationship between with customer loyalty and the investment on the relationship strategies
(Liang & Wang, 2006)

1.5 Research Objectives

This study seeks to contribute to the development of a conceptual framework that integrates
customer satisfaction, commitment and customer loyalty. Based on the theory of relationship
marketing, with the focus on the transferring process from customer satisfaction to customer
loyalty, this research aims to explore the influence of commitment in banking industry.
Accordingly a research model is build to present the relationships among the commitment,
customer satisfaction and loyalty variables. Then the quantitative methods, including the
questionnaires and SPSS analysis are adopted. By testing the model, this paper aims to provide a
greater understating on how to build commitment and effectively manage customer relationships.

With these strong empirical supports, this study attempts to solve four key questions:

13
1) How does customer satisfaction transfer into customer loyalty?

2) What factors could promote customer satisfaction in banking industry? Which factors will be
transferred into customer loyalty directly? If some factors function in an indirect way, could
commitment act as a mediating tool?

3) Do both affective commitment and continuance commitment promote customer loyalty in

banking industry? Which one has more effectiveness?

4) How appropriately the mediating role of commitment functions in banking background?

Although the researches on mediating role of commitments are conducted in multiple industries,
the attention for banking industry has not been made enough. With the increasing sophisticated
products /service emerging in the banking world, according studies are strongly demanded.
Therefore, this research attempts to fill such a gap. It is believed that this research could help
bankers understand how they can build commitment to win customer loyal relationships with
their clients.

1.6 Chapter division

Including the abstract, introduction, conclusion and bibliography, this paper is divided into five
chapters, and the core chapters will be settled as following:

In an attempt to offer a rationale for the presence of commitment‘s role in banking industry,
Chapter 2 of this paper will start by describing the framework for several concepts – customer
satisfaction, customer loyalty, commitment and mediating role. In particular, the three
components of commitment of ‗continuance’, ‘normative’ and ‗affective‘ commitment are
described. Each component of commitment has different antecedents and outcomes and that
customer may reflect different degrees of all three components of commitment to a particular
focus (Meyer and Allen 1997).

14
For the reasons above, we strongly suggested that banking industry conceive customer
relationship strategies to stimulate affective commitment of customers while going beyond
behavioral commitment. The focus of this paper is to examine the role of commitment for the
process of interaction between individual customers and banking staff. By use of continuance
and affective commitment, customer satisfaction and loyalty are connected together in a research
model. Lastly, this chapter will provide a literature review on the core constructs and depicts
relationships between the variables within a hypothesized research model. In the following
sections, the relationship between continuance commitment and affective commitment will be
discussed, and then the issue of whether affective commitment has greater effect on customer
loyalty and how affective commitment play the mediating roles between the customer
satisfaction and loyalty. Based on the literature, seven propositions are presented.

The chapter 3 will integrate the role of customer loyalty within the context of banking service
marketing variables such as service quality, relational benefits and customer satisfaction is called
for (Xu et al., 2006). A better understanding of the effects of service quality, relational benefits,
tardiness, attendance, performance measures, conformance with organizational policies and
customer satisfaction upon customer loyalty will be taken into account. Those variables above
not only facilitates the development of a model of service marketing, but also results in
managerial implications on the best use of their available resources. It may be that commitment‘s
mediating role, or at least the strength of that role in banking industry, is outcome-specific8
(MarketWatch: Financial Services, 2007) Therefore, the methodology section describes the
psychometrically sound measures that are selected and describes the sampling approach and the
data collection procedure. This section highlights that the affective commitment is critical for
banking industry; the reasons and evidence will be discussed.

The empirical study and results are presented to improve the understanding of how customer
satisfaction affects loyalty, in banking industry. The results have important implications for
companies‘ marketing strategy used to create customer satisfaction and loyalty.

8
The mediating effect of commitment can be measured and tested; the outcome of those measuring and testing is
clear enough to form a proposition.

15
Then in Chapter 4, related to statements proposed above and the discussion of ‗affective
commitment‘ in commitment literature, implications for theory development are taken into
account. In addition, some recommendations are established for further management practice.
This chapter may help to improve some of the theoretical basis and practical employment of
commitment. Finally, a sound conclusion implication, limitation and future research is provided.

16
 Chapter 2: Literature Review

2.1 Relationship marketing

2.1 1 Concept of relation marketing

With the increase in competition, more and more financial service providers develop or protect
its customer base, since building strong relationships has become a major marketing tool to
differentiate themselves and their products, and to keep customers retention (Evans, 2002; Payne
and Frow, 2004). Building relationships of mutual value should exist since the start of business.

According to Berry (1995) and Christopher at el., (1991), relationship marketing means creating
value for customers depending on the customers‘ needs and delivering products/services tailored
to the target customers, where the benefits to the customer lie in stability and durability(Han,
Wilson, and Dant, 1993).

In particular, attracting new customers is not enough for gaining a competitive advantage
(Palmer & Mayer, 1996). The more effective approach is to solidify the relationship; to
transform indifferent customers into devoted ones (Berry, 1995).

In consequence, the focus of relationship marketing has ‘shifted from putting the major
marketing resources in attracting new customers, to caring for existing customers, and providing
them with relational benefits’ and ‗emphasizes a long-term, interactive relationship between the
service provider and the customer, and long-term profit‘ (Xu, Goedegebuure, & Van der Heijden,
2006, p.82).

From the investigation of various service industries, Reichheld and Sasser (1990) demonstrated
that loyal customers cover the major part of the profits while the cost of maintaining customers is
often lower than the promotion cost aiming at acquiring new customers. Likewise, Gronroos

17
(1991) argued that establishing stable customer base and resell and cross sell for those stable
customers regularly is more profitable for enterprises. (Xu, et al., 2006)

In terms of customer‘s understanding, as Gronroos (1991) said that the interest in long-term
customer relationship is just typical. Jackson (1993) argued that relationship marketing applied
the basic human needs of emotion important. In line with this, customers could gather
psychology satisfaction from relationship marketing. (Czepiel, 1990).

Lately, research in the growing field of relationship marketing using the construct of customer
satisfaction has also focused on a cumulative concept rather than a transaction specific
conceptualization (Ganesan, 1994).

2.1.2 Development of Relationship Marketing

Transaction-based marketing perspective was respected before. Later the marketing concept has
shifted to the relationship-based marketing. Such a shift in thinking was also observed in practice
as with relationship-based marketing growing into a crucial strategic for supporting to be in a
lead in the industries. (Ganesan, 1994).

In the earlier stages of marketing, the immediate sale is emphasized and the 4 P governed
marketing strategies. Some researchers combined of transactional cost analysis and relationship
marketing to demonstrate the strength of the relationship-marketing concept (Rindfleisch
&Heide, 1997; Ghosh & John, 1999). This focus was based on economics research that also
looked at the market place as transaction based.

In the late seventies, many researchers found some unique characteristics in competitive markets.
For example, Arndt (1979) conducted non-market factors had increasingly come to characterize
inter-firm exchanges. Later, Wilson (1980) conducted that a kind of individual, long-term and
bilateral contracts could weaken the inter-firm relationship in competitive markets. Therefore,
relational exchanges were regarded as arrangements with an expectation of future collaboration,

18
where in the parties derive complex personal, non-economic satisfactions and which emerges all
the time (Macneil, 1980).

About the late 1980s, relationship marketing come into a heyday, and the issue of relationship
management had become the mainstream of marketing. In particular, Emory University
established the Center of Relationship Marketing highlighting the importance of developing
relationships for effective marketing (Sheth & Parvatiyar, 2002; Pillai & Sharma, 2003). The
significant contribution of its research was that providing theory support to identify major
precedents & consequences of relationship marketing (Bucklin & Sengupta, 1993).

The two constructs those were most closely associated with customer relationships were
customer satisfaction and loyalty. It was suggested that the relationships between customer and
organization were cause and effect to enhance commitment of customers.

2.1.3 Benefits of relationship strategies

The benefits of relationship marketing in services business, like banks, should be highlighted to
raise the attention in service industry.

First of all, for service industry, certain economic benefits will be received through applying
relationship strategies. Kalwani and Narakesari (1995) found that the business can generate
benefits when they built long-term relationships with customers; the benefits include lower costs,
higher sales volume and more profits.
Generally speaking, when the length of relationship is increased the profitability of organization
could increase at the same time. (Reichheld & Sasser ,1990). There is a broadly literatures share
dthe same point of view on the value for a relationship approach. For example, Shani and
Chalasani (1992) had suggested that from test the customers who had stable relationships with
the firms could make firms benefits and introduce new products with reduced risk in the market.
Similarly, Keltner (1995) stated that closer relationships with customers could stabilize the
market shares and increase the benefits.

19
Secondly, in terms of service customers, Gwinner, Gremler & Bitner (1998) indicated that there
are social, psychological, and economic benefits for retail customers.

Finally, in banking context, the direct and effective way to establish the customer loyalty is to
build a long –term and personal relationship with customers. (Ricard & Perrien, 1999;
Noordewier, John, & Nevin,1990).

Harrison had focused on banking industry, he said many customers to have a strong, clear and
definitely desire for an effectual relationship with the banking industry because the high
involvement and complexity of the service cause (Harrison, 2000).

As Gronroos (1991) said, in service industry, the relationship focuses on the mutual objectives of
the parties implicated that are achieved by means of deal and performance of promises. In order
to maintain the relationship, both parties must generate value out of it. There should have mutual
benefits and trust to maintain a long-term relationship. (Gronroos, 1994). So relationship
marketing must focus on a long-term, interactive deal and communicating between the providers
and recipients, and the profits will motivate the service providers to maintain a long-term
relationship.(Xu, et al, 2006)

Henning-Thurau et al. (2002) stated that the main purposes of relationship marketing were the
identification of the results of determinant, such as customer loyalty and word of mouth, and an
understanding of the relationship between these causes and effects.(Xu, et al, 2006)

With the increased deregulation and competition in banking industry,

‗A close relationship has the potential to provide the bank with a better understanding of the
operating environment facing a particular business, a clearer picture of the management
attributes of the owner and a more accurate overview of the prospects for the business.‘ (Ennew
& Binks, 1996, p.222)

In light of this, these businesses ‗should have easy access to helpful, familiar and qualified

20
banking professionals who will work with them and meet their individual needs‘ (Reinartz,1997,
p.53).

Generally speaking, the relationship strategies should close to customer and meet the needs of
customer, for example, customized banking conveniences should be promoted, such as
neighborhood branches where the staff could tell customers‘ names and provide customized
service. Certain authority of credit could be given to the branch manager. Keeping personal
attention to the needs of customers from different exchanges.(Colgate & Lang, 2005)

2.1.4 Role of Commitment for relationship marketing

Though relationship strategies can be effective to improve customer satisfaction and loyalty, it
still may not be appropriate in some cases (Anderson & Narus, 1991). For example, Wilkinson
and Young (1998); Hakansson and Ivan (1995) had conducted the concept of ‗burden of
relationships‘. They stated that the possibility of relationship neglect, inefficiency of
relationships and institutionalization of the relationship might result in a missed relationship.
Therefore, as Jackson (1985) argued that service industry establishing customer relationships
may not always be profitable. Likewise, Colgate and Danaher (2000) and Grayson and Ambler
(1999) have conducted the empirical research and found that there are some uncertain role of
relationship for service industry will cause the negative effects. (Colgate & Lang, 2005)

The above research suggests that in some cases relationship strategies might generate negative
outcomes. Obviously, the negative consequences from deploying relationship strategy might be
induced by loss of some expected benefits. If certain benefits do not materialize, the relationship
strategy, will be worsen, other than improved.

However, relationship strategy is important for investigation because the best policy for banks to
compete with the banking industry is to develop the relationships with customers. Through
relationship, both of bank and customer may get benefit: on the one hand customers have more
confidence for the stability of banking service; that meaning, bank can raise sales and profits

21
through cross selling for the customer base. In this respect, therefore, there should be added
construct to mediate the relationship with the practical execution and expected benefits. From
the next two sections, the customer satisfaction and customer loyalty, the further meaning of
expected benefits will be discussed.

2.2 Customer satisfaction

Service firms extensively measure customer satisfaction to determine the quality of products,
services and relationships. It has been suggested that satisfaction critical for continued
relationships.

2.2.1 Concept of customer satisfaction

One of the most early study on the customer satisfaction may be by Cardozo (1975) and he found
that the customer satisfaction has positive relationship with the frequency of purchase behavior;
later, Oliver (1979, 1980) and Oliver & DeSarbo(1988) have typically defined satisfaction as one
kind of cognitive state that evaluated feedback from customer whether suitable or not when they
finished purchase; moreover, Homburg & Annette (2001) suggested customer satisfaction could
be defined by customer comparison for the gap in customer‘s emotional response between the
assessment of the perceived service quality and the original expectation. Currently, customer
satisfaction is generally conceptualized as an attitude-like judgment or a pleasurable level of
consumption-related fulfillment following a series of purchases or consumer-product interactions
(Oliver, 1997). The satisfaction judgment is based on the experiences of customer‘s response for
one supplier‘s work on his product or service, the sales process, and the after-sale service (Yi,
1990).

Anderson, Fornell and Lehman (1994) develop a more clear explanation for customer
satisfaction: the customer satisfaction was one kind of purchase behaviors and the use experience
of product, and it is the result which was generated by the buyer expected; customer satisfaction
would be evaluated between that people used product consistency and the product performance

22
and belief before purchase. If there is consistency, the customer will satisfy; otherwise, they will
generate unsatisfied result.

In particular, the theoretical model underlying the vast majority of early satisfaction studies is
some version of the confirmation/disconfirmation paradigm (Olshavsky & Miller, 1972; Oliver
& Swan, 1989). According to the disconfirmation paradigm, expectancy disconfirmation is
divided into two processes: the first process is the acknowledged of expectations towards the
product/service; the second is the contrast of the experienced performance of the product/service
with prior expectations (Prakash, 1984).

As Anderson et at., (1994) inducted the past scholar‘s viewpoint; they distinguish from specific
transaction and cumulative transaction two viewpoints explained the customer satisfaction:
Specific transaction viewpoint was the customer satisfaction evaluated after buying behavior
when some specific purchase time or place, and it will provide judgmental information to the
specific product or service performance. Cumulative transaction viewpoint suggested that
customer satisfaction was the customer evaluated all purchase commodity or service experience,
and it may provide the industries some important strategically performance indicators in the
future.

In summary, previous research has defined a variety of forms of customer satisfaction (Oliver,
1997). Many literatures measure the satisfaction by different dimensions, such as: the type of
cognitive or affective response; the time of evaluation that might be immediately generated
depending on the past consumption; the object of evaluation that can be a transaction or a firm;
and the psychological process (e.g. disconfirmation of expectations) used to construe the
response.

Recently, studies on the concept of satisfaction were widen in two ways: 1) traditional models
implicitly assume that customer satisfaction is essentially the result of cognitive processes, but
new conceptual developments suggested that affective processes may also provide substantially
to forecast the customer satisfaction and to identify the affection of customer. (Fornell &
Wernerfelt, 1987; Oliver, 1997; Westbrook, 1987; Westbrook & Oliver, 1991); 2) some authors

23
had argued that customer satisfaction should be viewed as a judgment and not only a transaction-
specific phenomenon but also a cumulative experience made with a certain product/service
(Bayus, 1992; Wilton & Nicosia, 1986).

As Ganesan (1994) stated that a single transaction producing a statement of satisfaction is

unlikely to lead to long-term loyalty. Meanwhile, research in the growing field of relationship
marketing using customer satisfaction had focused on a cumulative rather than a transaction-
specific conceptualization. It might be too restrictive if we conceptualized satisfaction as the
outcome of one single transaction. Because of dissatisfaction with a single transaction is unlikely
to cause the customer to switch (Fornell, Johnson, Anderson, Cha, & Bryant, 1996).

2.2.2 Measurement of customer satisfaction

In many researches, we could find there is general agreement that customer satisfaction should
be conceptualized as a multidimensional construct (Yi, 1990). Accordng, LaBarbera & Mazursky
(1983), and Marr & Crosby (1992), there are three main categories of dimensions to be used for
the measurement of customer satisfaction:

Firstly the most frequently used dimensions is satisfaction with the product itself that relates to
the customer‘s evaluation of product performance based on such characteristics as technical
sophistication, dollar value, durability, and use friendly (Ramsey & Sohl, 1997);

Secondly, satisfaction with the sales process has received considerable attention in many studies
(Marr & Crosby, 1992; Ramsey & Sohl, 1997). In this stream, a satisfaction judgment focuses on
the interpersonal interaction between the sales representative and the customer to meet a
customer‘s needs.

Finally, satisfactions with the purchasing experiences were frequently conceptualized as a

dimension of customer satisfaction. This dimension is normally related to two basic properties
(Ostrom & Iacobucci, 1995), including the customer's judgment of the service quality and the

24
customer‘s evaluation of the interaction and after-use experience that he or she has made with
the service company (Crosby, Evans, & Cowles, 1990).

In sum, customer satisfaction can be conceptualized as a cognitive or affective appraisal, making

comparison between the standard of actually service quality to the expectation for the service
basing on individual‘s previous experience.

2.2.2.1 Dimensions

In many researches, we could find there is general agreement that customer satisfaction should
be conceptualized as a multidimensional construct (Yi, 1990). Accordng, LaBarbera & Mazursky
(1983), and Marr & Crosby (1992), there are three main categories of dimensions to be used for
the measurement of customer satisfaction:

Firstly the most frequently used dimensions is satisfaction with the product itself that relates to
the customer‘s evaluation of product performance based on such characteristics as technical
sophistication, dollar value, durability, and use friendly (Ramsey & Sohl, 1997);

Secondly, satisfaction with the sales process has received considerable attention in many studies
(Marr & Crosby, 1992; Ramsey & Sohl, 1997). In this stream, a satisfaction judgment focuses on
the interpersonal interaction between the sales representative and the customer to meet a
customer‘s needs.

Finally, satisfactions with the purchasing experiences were frequently conceptualized as a

dimension of customer satisfaction. This dimension is normally related to two basic properties
(Ostrom & Iacobucci, 1995), including the customer's judgment of the service quality and the
customer‘s evaluation of the interaction and after-use experience that he or she has made with
the service company (Crosby, Evans, & Cowles, 1990).

25
In sum, customer satisfaction can be conceptualized as a cognitive or affective appraisal, making
comparison between the standard of actually service quality to the expectation for the service
basing on individual‘s previous experience.

2.2.2.2 Measurement

Generally there are three broad categories of measures for rate the satisfaction level, that is,
single item measure of overall satisfaction, measure-attribute satisfaction and relative satisfaction.

Bolton (1998) focuses on customers‘ retrospective and cumulative evaluations of satisfaction

with an organization. He stated that in order to assess the current performance of the product, the
service or the firm in the eyes of customers, the customer satisfaction must be measured and
monitored continuously

One of the most frequently engaged measures of satisfaction is a single item measure of overall
satisfaction with a firm which could focus on ‗very dissatisfied‘ and ‗very satisfied‘ customers.
Overall satisfaction was also described as cumulative, global or aggregate satisfaction. Bolton
proposed that cumulative satisfaction ‗serves as an anchor that is updated with new information
obtained during service experiences‘ (Bolton,1998, p.45). Single-item satisfaction measures had
been shown to process passable levels of test–retest reliability and to be predicting consumer
behaviors and attitudes (Bolton & Drew 1991; Cronin & Taylor 1992; Oliver 1997).

However, in applied relationship marketing research contexts, researchers are often interested in
evaluating the relationship of overall satisfaction to compare with the major attributes of the
service experience (Mittal, Katrichis, & Kumar, 2001).

The next, another measure-attribute satisfaction, are often collected to resolve which attributes
are ‗key drivers‘ of cumulative satisfaction that can be used to allocate resource reasonable and
to improve better quality initiatives. Existing customer groups can also be segmented based on

26
differences between overall and attribute satisfaction scores (Mittal & Katrichis, 2000; Mittal et
al., 2001; Woo & Fock, 2004).

Last, a group of academic researchers had conducted related-measure satisfaction, the objective
of the researches is to estimate measurement errors and reduce response biases by combining
attributes of varying levels of satisfaction (Mittal et al., 2001). A meta-analysis of satisfaction
studies suggested that multi-item attribute measures and single item global measures may have
different relationships to factors used when the measures put different antecedents and
consequences (Szymanski & Henard, 2001). The bias towards favorable customer satisfaction
ratings has led to interest in factors that may make respondents either critical or lenient in their
ratings (Mittal & Kamakura, 2001). There is also increasing interest in measuring cumulative
satisfaction with a firm relative to evaluations with other competing firms (Gale, 1994;
Oliver,Varki & Rust ,1997; Olson-Buchanan, 2002). These researchers argued that competitive
satisfaction measures should be neutrality rather than target-focused measures (Gale, 1994;
Olson-Buchanan, 2002).

Based on this review, overall satisfaction, attribute-measure satisfaction, and relative-measure

satisfaction offer three distinguish approaches for ascertaining customers‘ current evaluations of
a service provider. And also the customer experience factors (e.g. Ganesh, Arnold, & Reynolds,
2000; Wangenheim & Bayon, 2004) or customer demographic differences (Mittal & Kamakura,
2001) may influence satisfaction score, due to the recourses availability, the attribute-measure
satisfaction is employed in this study,

2.3 Customer loyalty

2.3.1 Concept of customer loyalty

The concept of loyalty has a long history in the academic literature. Within the relationship
marketing, articles focused on the subject of brand loyalty can be traced back to the early 1920s
(Copeland, 1923).

27
The mass of early loyalty studies conceptualized loyalty behaviorally, as a behavior off repeat
purchasing of a particular product/service over time. Churchill (1942) focused on the purchased
sequence in which brands, while other authors (e.g. Brody & Cunningham, 1968; Cunningham,
1956) measured loyalty through the percentage of purchasing contributed to a given service
business; moreover, Farley (1964) focused on random measures like probability of purchase.
Most of the early studies suppose loyalty in terms of repeated purchases of the same brand
mostly (Cunningham, 1956; Kuehn, 1962).

The factors of loyalty measurements, e.g. switching, recommendations, repurchase intentions

(Anderson & Sullivan, 1993), and willingness to pay a price premium (Zeithaml, Berry, &
Parasuraman, 1996), it seems that loyalty has been measured as a minimum differential needed.
This approach, though widely used, is not enough to demonstrate the forming mechanisms that
explain the complex behavior or pattern of repeated purchases (Dick and Basu, 1994; Knox and
Walker, 2001).

Therefore, researchers have provided customer loyalty in two distinguishable ways, one is the
behavioral and another is the attitudinal loyalty. Day (1969) proposed a framework for two-
dimensional of loyalty with an attitudinal dimension and the behavioral dimension. He argued
that the use of solely behavior-based loyalty measures because these do not discriminate between
true loyalty and temporary loyalty.

‗The key point is that these spuriously loyal buyers lack any attachment to brand attributes, and
they can be immediately captured by another brand that offers a better deal‘ (Day, 1969, p.30).
Day‘s perspective changes the face of the research for the customer loyalty.

The two-dimensional conceptualization of customer loyalty will be adopted in this study. Beside
the behavioral and the attitudinal dimension has received a good consideration in research into
customer‘s behavior in the service market. Attitudinal dimension play a significant role in many
of the descriptive studies of relationship marketing. One‘s attitude toward a firm affects the
consumer response in the future. Different attitudes would lead to different level of personal
emotions to a service or product; and such attitudes restrict to the individual‘s mental degree of

28
loyalty mainly (Hallowell, 1996). Hence, both antecedents and consequences will effect on
attitude. Through experience with a firm or its product, a firm‘ offerings are formed toward
attitudes. In term of attitudes, one of the most important facts is that there is a significant
relationship between attitudes and behavior. However, it should be noticed that a customer‘s
attitudes could not be necessarily related to a single customer behavior, but it should be related to
the same group of customers‘ pattern of behaviors. Due to the above discussion, we expected
that attitudes will be related to the performance of a firm in the service market. (Innis and La
Londe.1994).

In line with this viewpoint, Jacoby investigates a conceptual definition of brand loyalty. He
pointed out that the significance of a conscious evaluation process, leading to loyal behavior,
thereby excluding random repeat purchase (Jacoby,1971; Jacoby & Chestnut, 1978; Jacoby &
Kyner,1973). Many researchers stressed that true customer loyalty also should include a positive
attitude, and in a sense of commitment to the organization. (Dick & Basu 1994; Ganesh et al.
2000); Oliver (1997) defined the loyalty of the same commitment to keep re-buying behaviors of
consumers preferred products / services, these consumers do not have much negative impact of
market changes.
Some studies also found that the correlation between the length and behavioral of relationship
and attitudinal measures to be not significant or even negative (e.g., Crosby & Stephens, 1987).
Kumar, Scheer and Steenkamp (1995) pointed out that the non-significant relationship exists
between age of relationship and relationship quality
In addition, Lusch & Brown (1996) said that they could not found the correlation between length
of relationship and long-term orientation and greater usage of explicit contracts. In particular,
Jones and Sasser (1995), said that there were long-term and short-term customer loyalty. A long-
term loyal customer had a long-term purchase, and will not easily change their choice, and the
short-term loyal customers will immediately change their minds when they had a better choice of
products or services.

Grayson and Ambler (1999) studied the advertising company‘s customer relationship and found
that there was a negative effect existed between the long-term customer relationships and service
usage and sales. Based on the recommendations adopted by Moorman, Zaltman and Deshpande

29
(1992), as a relationship becomes more long-term, it becomes even more negative impact,
reducing the positive impact on the relationship between the factors, the researchers found that
certain 'dark side' structures, such as opportunism, loss of objectivity and the rising expectations
appear.

According to Weiss and Kurland (1997)‘s research, the length of relationship could in lead to the
asymmetric investments in customers of different sources, which adversely affected the direction
of the relationship. Fournier, Dobscha, & Mick, (1998) have also questioned the issue that the
effect of maintaining strong relationships between service suppliers and customers, and the
benefit of the relationship. They though since long-term relationship must be based on balance
between giving and getting but people always tend to forget giving and favor getting.

The reason for loyalty can be diverse. Oliver (1997) believed that the customer loyalty means
that customers may purchase the product under the environmental impact or the marketing
events prompt the transformation that possibly hidden in customer behavior, but they would not
change their commitment of repeated purchase and further purchase intention with the preferred
product/ service. Ha (1998) showed that pressures and influences from the social environment
explain the consumer‘s pattern of repeated purchases to buy a specific brand. In fact, the social
impact is so mandatory that although the consumers may have a negative attitude towards a
brand, and she/he decides to buy it in order to avoid the criticism of the social environment.

Loyalty is an important issue because it has a positive impact on the company‘s bottom line. This
is because it is easier, more direct and less expensive to sell to existing customers (Barlow and
Moller, 1996).

2.3.2 Categories of customer loyalty

Gounaris and Stathakopoulos (2004) tried to consolidate the three existing approaches. Their
research reveals four specific types of loyalty, that is, Premium Loyalty, Covetous Loyalty,
Inertia Loyalty and No Loyalty.

30
According to Gounaris & Tzempelikos(2007); Gounaris & Stathakopoulos(2004) work:

Premium loyalty represents the highest level of loyalty since premium loyal consumers have a
favorable attitude towards the brand, they repeatedly purchase it and, also, they have the
approval of their social environment for doing so.

Inertia loyalty on the other hand is much weaker. Although it encompasses a pattern of repeated
purchases, it lacks both affectional and social reinforcement. Habitual or convenience-seeking
behavior can explain the pattern of repeated purchases.

Covetous loyalty is quite different from both premium and inertia loyalty in the sense that it does
not involve purchasing of the brand. However, covetous loyal consumers have grown positive
feelings and affection for the brand. The social environment reinforces this attitude. Such
consumers are important for the company because of the income they indirectly generate
through influencing the choices of peers, relatives, and friends and so on.(Gounaris et al., 2007, p.
69)

No loyalty is no purchase at all, and a complete lack of attachment to the brand. Also no social
influences to be even cognitively loyal to a brand.(Grounaris & Stathakpopulis, 2004, P.286)

The development of the concept of customer satisfaction is ‗loyalty intentions', that is, willing to
repurchase a brand, which is the company primary concern. (McDougall and Levesque, 2000)
However, covetous loyalty was not covered by a purchasing behavior (Gounaris et al. 2007), so,
this study would focus on premium and inertia loyalty, the two types of loyalties that directly
impact on the company‘s market and financial performance.

2.3.3 Meaning of customer loyalty for banking industry

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Numerous studies have been carried out identifying the benefits of customer loyalty to provide
service providers.
According to Xu et al. (2006)‘s study, those benefits include the initial cost of introducing and
attracting new customers and consist of
(1) Positive word of mouth;
(2) Increases in the number of purchases;
(3) Increases in the value of purchases.

Moreover, loyal customers can be very helpful for the service companies to improve service
quality, as they are willing to communicate with the company in a positive way.

A positive word of mouth reflects the affective dimension of loyalty (Gremler & Brown, 1996).
It is defined as informal communications and evaluations between existing and potential
customers regarding the products or services (Hennig-Thurau et al., 2002). It is the result of a
customer‘s view of the value received in a transaction or relationship (Heskett, Sasser, &
Schlesinger, 1997) and can be understood as the customer‘s overall evaluation of the
performance (Johnson & Fornell 1991). As personal communication is considered as a more
reliable source than non-personal information (Zeithaml & Bitner, 1996), word-of-mouth and
oral communication has strong impact on the future of consumer purchasing decisions.
Especially in banking industry, when the service involves high risk for the customers, word-of-
mouth communication could broaden the customer base for the bank (Hennig-Thurau et al.,
2002).

In particular, Hirschman (1970) and his book- ‗Exit, Voice, and Loyalty‘, disputes the
‗Competitive Paradigm‘. Hirschman conducted that how loyalty impacted different alternatives
of action. Hirschman claims these consumers‘ complaints that is ‗voice‘ often become null and
void for some institutions such as hospitals, and schools, due to the competition among the
organizations with a powerful social force able to find out a convenient exit with little price.
Such a convenient exit transfers the customers‘ ‗voice‘ slow, and impeded the process of service
quality improvement. However, it could occur that the most sensible and inarticulate consumers
leave the organization they complain, while these consumers are most profitable. Therefore,

32
these organizations tend to use differentiating strategy for some consumers rather than overall
quality improvements for the extensive consumers. (Hirschman, 1970, P. 26-27).

If we apply Hirschman theory to the banking industry, competition could easily result in
resourceful, consumers change their bank to the substitute offering the better services.
Consumers‘ attitudes towards their banks influence their potential actions to ‗exit‘ (switch banks),
‗voice‘ (complain, renegotiate bank conditions) or ‗remain passive‘ (staying on as customers in
banks with less favorable terms)( Hirschman, 1970).

For the banking industry, Bowen and Chen (2001) mentioned that through providing strong
word-of-mouth, create business referrals, provide references, loyalty of customers will help bank
promote its market performance. These loyal customers will also raise sales volume by
purchasing broader categories of the bank‘s products by making purchases more frequently.
Nevertheless, some banks are only worried about meeting customers‘ expectations, in a high
level of customers‘ satisfaction. These banks think that repurchase will be increased if they
satisfy customers‘ needs. However, Jones and Sasser (1995) had proven that customer
repurchase does not necessarily mean that customers are loyal. They might at any time defect
and for different reasons.

2.4 Relationship between customer satisfaction and customer loyalty

2.4.1 Complexity of the relationship between customer satisfaction and customer loyalty

Customer satisfaction and loyalty could help companies to achieve market and financial
objectives. (e.g., Oliver et al., 1997; Fornell, 1992; Heskett et al., 1997). So, many companies
delivered satisfaction in anticipation of gaining their customer‘s loyalty (Oliver, 1999).

In terms of severe competition and rising customer anticipations, firms are greatly interested in
maintaining existing customers. As a matter of fact, all companies depend on repeat purchases;
that means it has a strong interest in the antecedents of customer loyalty. Numerous studies have

33
demonstrated a positive relationship between satisfaction and various aspects of loyalty such as
customer patronage and retention (Oliver 1997).

Studies by Bolton (1998) and Bolton and Drew (1991) also suggested that the current satisfaction
may be affected by a customer‘s cumulative and more stable viewpoints that have developed
over time. Fornell, Johnson, Anderson, Cha, & Bryant (1996) conducted researches in various
service industries, and they found there is a positive correlation between the overall satisfaction
and customer loyalty or intention. Besides, Shemwell, Cronin, & Bullard, (1994) found trust will
to be important in building customer relationships as the outcome of their study, they also
suggested that the higher the level of trust, the greater the probability that customers will
continue the relationship with the service providers. Heskett, Jones, Loveman, Sasser, &
Schlesinger (1994) conducted that the different of customer loyalty depended on the level of
satisfaction. Their analysis identified very satisfied and unsatisfied customers, not alike satisfied
customer, the unsatisfied customers tended to speak out against the service company at every
opportunity. Similarly, Hallowell (1996) and Bitner (1995) argued that the relationship between
customer satisfaction and customer loyalty is positive.

As Oliver (1999) study, the association between satisfaction and loyalty was not straight-forward.
Gronroos (1990) indicated that trust for a service provider is especially important to measure the
relationship from the customer‘s standpoint. Later, Hennig-Thurau, Gwinner, & Gremler (2002)
argued that trust had a positive impact on satisfaction, since higher levels of trust in the
interaction between the service provider and customer would lower the worry for the transaction
and the customer satisfaction will be increased. The results of their studies indeed identified trust
had a significant and positive effect on satisfaction. The work done by Hennig-Thurau et al.
(2002) shows that of all variables of customer satisfaction have the strongest direct impact upon
customer loyalty, and their outcome supports their suggestions that there are significant positive
effect exist between customer satisfaction and word-of-mouth communication. Shankar, Smith,
& Rangaswamy, (2003) argued that loyalty and commitment strengthen overall satisfaction and
made customers to be tolerant to the disappointing experiences. Likewise, in Hallowell‘s (1996)
research, he confirmed that satisfaction has strong positive relations with positive word-of-mouth.
In terms of prior experience and loyal attitudes, it was differences in customer loyalty might

34
impact current ratings of satisfaction with the organization in cross-sectional surveys (Shankar et
al. 2003). Lam, Shakar, & Murthy (2004) argued that loyal customers may acquire greater
personal, non-economic satisfaction and present higher satisfaction than less loyal customers.

The significant focus on customer satisfaction is based on the implicit hypothesis that there is a
strong positive relationship between customer satisfaction and loyalty.
Typically,‘ customer satisfaction is thought of as an immediate antecedent to customer loyalty‘
(Anderson & Sullivan, 1993, p.125). In turn, customer loyalty should lead to increasing
shareholder value and asset efficiency (Reichheld, 1996; Rust & Oliver, 1994). Therefore,
achieving high levels of customer satisfaction has become a major target for many companies.

In sum, maintaining customer loyalty in the long-term could be one of most important strategies
for financial service industry. As Steyn said that (2000), loyalty brings growth in customer base
and following benefits for an industry. Therefore how to develop the potential customer value
through maintaining satisfaction and then loyalty of customers is at the heart of most service
industry.

2.4.2 Mediating factors in the relationship of customer satisfaction and loyalty

From a managerial perspective, this type of research is also relevant. The project manager who
was responsible for customer retention programs need to provide information on the
determinants of customer loyalty. This is particularly important for managers to know for which
customers could rely heavily on satisfaction as a driver of loyalty.

In addition, it is important to know what types of customers tend to be less loyal even though
they may be very satisfied. Previous studies of customer satisfaction, customer loyalty, as well as
the link between the two structures will be reviewed, and specify a conceptual model, different
aspects of the relationships between satisfaction and loyalty will be presented.

35
Some possible moderator variables of those relationships are introduced. Research methods and
results are then described. This chapter concludes with a discussion of the findings, an
elaboration of the restrictions of the findings, as well as an exploration of the theoretical and
managerial implications.

2.4.2.1 The main groups of mediating factors

There are three main groups in the previous study, discussing the relationship between customer
satisfaction and loyalty:

The first group of empirical evidence was provided by the researches is a positive relationship
between customer satisfaction and loyalty without further elaboration. Other studies explored the
functional form of the relationship between customer satisfaction and loyalty. Finally, the third
type of study to explore the impacts of moderator variables on the relationship between the two
structures.

In the first study of flow, Bitner (1990) shows that satisfaction has an indirect mediated effect on
loyalty by perceived quality. In addition, her results showed that loyalty is also influenced
directly by satisfaction. Similarly, Rust and Zahorik (1993) and Rust, Zahorik, and Keiningham
(1995) found a link between customer satisfaction and loyalty using data from the retail bank
market and from a national bank chain. Additional empirical evidence for a positive relationship
between the two kinds of constructs is provided by Anderson et al. (1994), Biong (1993),
Hallowell (1996), Halstead and Page (1992). In marketing channels research, Gassenheimer,
Sterling, and Robicheaux (1989) and Ping (1993) supported the existence of a positive
satisfaction and loyalty links.

Although research in the first category was usually provided that there was a linear relationship
between customer satisfaction and loyalty based on the explicit or implicit assumptions, the
second group of researchers had provided theoretical and empirical support for a more complex
(e.g. non-linear) structure. As an example, Heskett, Jones, Loveman, Sasser, and Schlesinger

36
(1994) provided support for a concept of convex structure of the relationship, which is,
increasing marginal returns.
Jones and Sasser (1995) considered that such a convex structure, and it is likely to mainly occur
in highly competitive environments. Empirical support such concept of a convex relationship is
provided by Auh and Johnson (1997). Woodruff, Cadotte, and Jenkins (1983) proposed a saddle-
shape curve of the relationship, which means that low or high satisfaction levels should increase
the customer's possibility of response in some extent. In some medium level of satisfaction, the
customers might find themselves in a so-called "zone of indifference." In this interval, the
satisfaction only had a small degree of the impact on customer loyalty (e.g. Finkelman, Cetlin, &
Wenner, 1992). Finally, the survey results showed that, the relation between customer
satisfaction and loyalty can be both linear and nonlinear depending on the magnitude of
transaction costs.
The third was also a very limited group studies investigated the existence of external factors that
moderated the relationship between satisfaction and loyalty. Appling moderating regression
analysis, Bloemer, Pauwels, & Kasper, (1996) found that participation had a positive moderating
effect on the link between satisfaction and loyalty. In fact, the issue of moderating effects on the
relationship between satisfaction and loyalty has received limited attention of the literature
suggests, in this paper, we will try to fill the gap of the research.

2.4.2.2 The nature of relationship

Before describing the mediating role and its impact on the satisfaction-loyalty relationship, we
must understand the nature of the relationship itself. According to Jones and Sasser(1995), there
were two types customers predominate: loyalists and mercenaries
Loyalists are very satisfied customers who are willing to buy back, while mercenaries are mild-
satisfied customers who do not have a long-term commitment and are continuously finding a
better deal from another company. The result should be a specific type of relationship between
satisfaction and loyalty. Loyalty should be increased marginally over moderate to high degrees
on the satisfaction continuum (where mercenaries are mainly) and then significantly increased at
the higher end of the satisfaction continuum (such as loyalists are created). Auh and Johnson
(1997) provided a theoretical explanation for this proposed increase in the effect of satisfaction

37
on loyalty. In their review, a clear changed in customer to solve the problem, and the associated
changed in a customer's evoked set of acceptable brands, drives the results. This arguments
based on Howard‘s (1977,1983) is a broad distinction between extensive problem solving and
limited problem solving on the one hand, and re-use reaction behavior for the other.
In problem-solving behavior, customers consider all available alternatives. They use decision
and strategies rules to weight the costs and benefits of the alternative, in order to identify those
that best meet their needs. Bettman and Zins (1977) referred to such a constructive process.
Because their experience and expertise in the development, customers identify a smaller set of
preferred alternative. The customers focused to shift from "external" information retrieval
"internal" search (Howard, 1977).

2.4.2.2 Alternatives in the relationship of customer satisfaction and loyalty

The result is non-continuity, or categorical changes, in the external information amount of

processed and number of alternatives considered as customers move from problem solving to
more orderliness behavior. This prediction is in line with a growing number of marketing and
consumer research studies (Dickson and Sawyer 1990; Hoyer & Brown, 1990; Hoyer, 1984).

According to Auh and Johnson (1997), customer was transferred from ‗problem solver‘ to
‗committed buyer‘ revealed the evolution process of customer satisfaction to customer loyalty:
Customers, with their growing experiences, better understood whether certain products or
services met their needs and wants. If their needs and wants were well met, the satisfaction level
would increase, and the cost of searching alternatives might be higher than the benefits they get;
if customers felt moderate or bad for certain products or services, they would naturally search the
alternatives of the original providers. Therefore, when customer satisfaction was kept at a high
level, customers tended to be transferred from problem solvers to more reutilized purchasers, that
was, they made the purchase decisions and behaviors depending on a more narrow choices and a
more strong drive. Consequently, the customer retention and customer loyalty was achieved at
the same points with the customer satisfaction.

38
However, such a positive impact on customer satisfaction and loyalty is not stable. This means
that customer satisfaction does not necessarily lead to customer loyalty (Howard, 1977, Belk,
1975 and Barsalou, 1983): Firstly, In many cases, due to time and geographic constraints, a
specific purpose or occasions, replacing the original service providers was necessary; Secondly,
the other important factor was the existence of ceiling effects, when the customer very
satisfaction for some products or services, customers might still change their purchasing
decisions or acts, even if the quality of products or services were fully met.(Johnson & Auh,
1998)

One aim of this paper is to investigate the relationship between satisfaction and loyalty in the
context of banking industry. It is obvious that the personal characteristics would impact on such
relationship in a great way. Given that, the way of the personal characteristics impact the
strength of the relationship between satisfaction and loyalty will be studied. Similar questions
have been studied for many industries in many literatures; however, based on the particular
characters of Taiwan market, this paper will offer new evidence for this question. In a word, by
examining the effects of moderating factors on this relationship, this paper would provide
additional insight into the relationship between customer satisfaction and customer loyalty.

2.5 Service quality

2.5.1 Concept of service quality

In the past, the most widely approach to understand service quality has been introduced by Gap
Model, (Parasuraman, Zeithaml & Berry, 1985) which defined service quality as the dissimilarity
between customer perception of current service and expectation of an excellent
service.(Mukherjee, Nath, & Pal, 2003) A number of studies have investigated the effect of
service quality on dependent variables, including customer satisfaction, purchase intention and
customer loyalty.(e.g. Cronin, Brady, and Hult, 2000; Taylor, Nicholson, & Ramiro, 1997;
Wallace, Giese and Johnson, 2004). Nevertheless, individual study findings have differed widely
in terms of statistical significance and vastness of service quality effects. For example, some

39
studies introduced a correlation between service quality and customer satisfaction above 0.8 (e.g.,
Gotlieb, Grewal, and Brown, 1994) whereas others (e.g., Zhou, 2004) reported a correlation of
0.2 below, which numbers a differential explanatory power of service quality on customer
satisfaction of 4 % versus 64 %. And other studies that found that service quality amounted to
more than 60% in the variance of customer loyalty.(Zeithamo, Berry, and Parasuraman, 1996)
Such results brought out an inconsistencies questions about the impact of service quality on
customer loyalty and despondences. Hence, in terms of its significant service economy, there is
still a lack of agreement about the magnitude of the impact of service quality on key customer
variables, as well as a different thinking of customer satisfaction and loyalty and a theoretical
model between customer satisfaction and customer loyalty. (Carrillat, Jaramillo, Mulki, 2009)

2.5.2 Relational Benefits of Service Quality

Currently, most of marketing literature recognizes the necessity of developing and maintaining
lasting relationships with customers, especially in of service businesses context. Henning-Thurau
et al., (2002) emphasize the approach of promoting customer relationships on the benefits
beyond the core service provided.

Generally speaking, only if both service provider and receiver can get benefit derived from a
relationship, such relationship can exist in the long term with its rationale. Based on Berry (1995)
and Henning-Thurau et al. (2002)‘s research, three relational and typical benefits of relationship
are presented, that is, social benefits, special treatment benefits and trust. These three relational
benefits of customers receive are apart from the core service:

‘• Social benefits pertain to the emotional part of the relationship and are characterized by
personal recognition of customers by employees, the customer’s own familiarity with employees,
and the creation of friendships between customers and employees.
• Special treatment benefits take the form of relational consumers receiving price breaks, faster
service, or individualized additional services.
• benefits of trust refers to perceptions of reduced anxiety and comfort in knowing what to expect
in the service encounter’ (Xu et al., 2006, p.84).

40
 Social benefits
A positive social impact is expected on customer satisfaction. Since customers assess the service
quality mainly depending on the interaction with employees of service providers. Consequently,
social benefit is at heart of customer‘s concerning in many services industry (Reynolds & Beatty,
1999). Likewise, Price and Arnould‘s (1999) stated that commercial friendship can be a key
constituent of social benefits. It is believed that there is a positive association between
relationship and customer satisfaction, that is, if customer-employee relationship is improved, the
satisfaction level towards service provider will increase (Hennig-Thurau et al., 2002). However,
their research did not indicate a significantly positive relationship between the two variables.

 Special treatment benefits

Many organizations use ‘Special treatment benefit’s as an important part of relationship
marketing strategy, for higher financial returns. However, when the organization provides
additional types of special treatment benefits (e.g. economic saving and personalized service),
cost of switching for consumers might be increase, (Hennig-Thurau et al., 2002), so does the
emotional switching barriers. This may result in increased customer loyalty. Given that,
Reynolds and Beatty (1999) conducted a empirical research, and made a paralleling argument:
special treatment benefits as inherent part of the service performance, is believed to correlate
positively with the customer‘s satisfaction level towards service quality.

 Benefit of trust
In fact, ‗loyalty‘ itself is closely related to ‗trust‘. In banking industry, banks want loyal
customers while the customers want reliable banks too. Given that, Morgan and Hunt (1994)
pointed out in particle aspect, employees of service provider, explicitly or implicitly, bear the
task to inspire the feeling of trust of customers. Generally speaking, the customer would respond
with trust or become loyal when they think the service provider is reliable; oppositely, the loyalty
can be easily lost if customers fell their trust is betrayed, for example, when certain terms are
changed into imparity clause.

41
Although ‗true loyalty‘ means that besides disappointing incidents customers still keep
continuous purchase, in practical word, the switching action still happens easily. From the
consumer‘ view, loyalty can be negative from them, due to loyalty‘s opposable result, that is,
decreasing the consumer power and damage of their consumer sovereignty. Given that, Alhabeeb
gave a wide-accepted concept to loyalty as follows:

‗Blind consumer loyalty to a product may lead to the elevation of producer’s power and give a
blank card for setting prices, adjusting quality and altering services, and ultimately reversing
consumer sovereignty’ (Alhabeeb, 2007, p.609).
Moorman et al. (1992) introduced the definition of trust, is willing to rely on partners to share
one of them confidence. Trust would create benefits for the customer because the internal
relations in the efficiency reduce transaction costs, and these benefits would enhance customer
loyalty to the relationship over time (Morgan & Hunt, 1994).

As Berry (1995) suggested that trust reduced uncertainty and vulnerability, especially for so-
called black-box-type services, it was difficult to assess because of its intangible, complex, as
well as technical nature. Therefore, Berry proposed that customers who develop trust in service
providers, based on their experiences, there are good reasons to stay in these relationships. (Xu,
et al, 2006)

2.5.3 Measuring Service Quality

Exploratory research conducted by Parasuraman et al. (1985), supports the notion that service
quality is an overall evaluation similar to attitude. Their research findings revealed that
regardless of the type of service, customers use the same general criteria in arriving at an
evaluative judgment about service quality. They also support that customer perception of service
quality stems from a comparison of what they feel service firms should offer, with their
perceptions of the actual performance. Correspondingly, the empirical study of Van Montfort,
Masurel, & Van Rijn (2000) has revealed that satisfaction can be predicted by the service

42
performance perceived by customers. Performance is better than expected or negative when
experienced performance is worse than expected (Van Montfort et al., 2000).

Service quality is of particular importance for financial service providers who characteristically
offer products that are homogenous in nature (Stafford & Stafford, 1998). In the services
literature, perceived quality, which is the result of a comparison that customers make between
their expectations about a service, and their perception of the way the service has been performed
(Gronroos, 1984; Parasuraman et al., 1983, 1985, 1994; Zeithaml, 1985), appears to be the main
operationalization of service quality. Perceived service quality is therefore viewed as the degree
and direction of discrepancy between customers‘ perceptions and expectations (Parasuraman et
al., 1988).

In operationalizing the service quality construct, according to the generally accepted

psychometric process, Parasuraman et al. (1985, 1988, 1994) have designed a 22-item so-called
SERVQUAL (service quality) instrument, making use of both qualitative and quantitative
method. A wide range of research accepts SERVQUAL as the most useful measurement
instruments of service quality. They have provided a method of measuring service quality base
on five dimensions:

‗• Tangibles: physical facilities, equipment, and appearance of personnel.

• Reliability: ability to perform the promised service dependably and accurately.
• Responsiveness: willingness to help customers and provide prompt service.
• Assurance: knowledge and courtesy of employees and their ability to inspire trust and
confidence.
• Empathy: caring, individualized attention that the firm provides its customers.‘ (Parasuraman
et al., 1988 , P.23)

Hypotheses on the main effects of different dimensions of customer satisfaction on loyalty are
developed. Then possible moderators of the linkage between satisfaction and loyalty are
introduced. The focus is on personal characteristics as suggested moderator variables.

43
2.6 Commitment

The famous motivation theory which proposed by Maslow (1943) is the satisfaction of needs that
the origins of the conceptualization of commitment. This paper explores the meaning of
commitment in banking services with particular reference to the relationship of bank staff vs.
their clients and the relationship of bank staff vs. organization. Research in relationship
marketing has focused attention on the concept of commitment (Morgan and Hunt 1994).
Commitment has also been closely related to the need for social belonging (Kanter, 1968). This
study has emphasized the vulnerability of parties in a relationship where commitment is not
apparent.

2.6.1 Concept of commitment

There is a medium in all things. So the relationship of two parties must have the cause and drive
such relationship exist. Given that, several authors such as Morgan & Hunt (1994), and
Garbarino & Johnson (1999) have emphasized that commitment is an important component of
successful relationship because it gives rise to mediate behaviors. It will help build a long-term
relationship between the service parties. Likewise, Beaton and Beaton (1995) pointed out
commitment is effective to influence investors‘ decisions that seek to establish and maintain
long-term, mutually beneficial relationships.

Despite extensive work in the area of commitment, there has been little empirical research into
the meaning of commitment in customer-supplier relationships. We has only found in the
psychology and organizational behavior literature,

Some researchers discussed commitment within customer-supplier relationships, such as

between banking professional service providers and their customers (called clients), have largely
‗borrowed‘ the meaning of commitment developed within the context of employees and their
relationship with their organization (Mowday, Steers and Porter 1979; Meyer and Allen 1991).

44
However, as Singh (1999) stated, the meaning of commitment should be re-identified in
customer-supplier relationships.

2.6.2 Dimensions of organizational commitment

Generally, commitment is referred to as a lasting want of upholding certain relationship (Morgan

and Hunt, 1994). Similarly Gruen (1995) define the commitment as a long-term orientation and
desire of a buyer to have a long-term relationship with a seller. Day (1969) and Dick and Basu
(1994) stated that there is a negative relationship with the potential obstruction of repurchasing
decisions and then a strong positive correlation between commitment and customer retention.
Similarly, Beatty, Homer and Kahle (1988) conducted a research on the distinct constructs of
commitment, in order to state that commitment in the buyer-seller relationship, directly generate
loyalty among customers.

In this research three different types of commitment are discussed, that is, affective commitment,
calculative commitment and normative commitment.

The three-dimensional or types of human goods in human relationships (friendship), described

by Aristotle twenty-five centuries ago, presents a clear parallelism to the modern three-
component conceptualization of organizational commitment (Meyer and Allen, 1987).

In organization theory, there is an important amount of theoretical work had dedicated to the
definition of commitment, as well as loyalty (Chen, Tsui, & Farh, 2002; Olson-Buchanan, 2002;
Rosanas and Velilla, 2003). However, not much theoretical work seemed to have been done from
the field of business ethics to explain why organizational commitment should include three
dimensions. Why are the three extents presented as a multidimensional mindset in which final
commitment is the combination of the three of them (Meyer and Herscovitch, 2001)? Is it that
these three dimensions are necessary, satisfactory and complementary aspects of the same
actuality of commitment? (Allen and Meyer, 1990; Gonzalez, 2008)

45
Empirical studies present important demonstration of the potential explanatory potency of this
three-dimensional commitment (Ko, Price, & Mueller, 1997). But, in the meantime, criticism
endures: low reliability of the continuance commitment, and lack of distinguishing validity
between normative and affective commitment.

The combining and embracing concepts are still needed. The main purpose of the following
investigation section is to review the content of the three dimensions of commitment offered by
the Allen and Meyer model, and to present a broader concept of moral and psychological
commitment based upon the Aristotelian ethical tradition (Becker, 1960). The dimensions of
commitment while there are differences among authors concerning the concept and nature of
organizational commitment, important similarities can be found as well. (Gonzalez, 2008)

2.6.2.1 Affective commitment

As Allen & Meyer (1990) and Geyskens, Steenkamp, Scheer, & Kumar (1996), affective
commitment can be defined as a party‘s willingness to maintain certain relationship. Instead of
instrumental worth or utility benefit, people choose to maintain such relationship out of the own
sake of this relationship (e.g. the pleasure or the sense of belonging derived from such
relationship). Mowday, Porter and Steers described that affective commitment is ‗the relative
strength of an individual’s identification with and involvement in a particular organization‖
(Mowday, Porter, & Steers, 1982, p.27); as Meyer and Allen (1997) said, since affective
commitment is linked with productive behavior aimed at contributing meaningfully to the
organization, it is often seen as the most valuable part for building commitment for an
organization.

In particular, Jaros, Jermier, Koehler, & Sincich referred ‗affective dimension‘ to explain the
bond to an organisation as an affective attachment that includes feelings like: ‗affection, warmth,
belongingness, loyalty, fondness, pleasure, and so on‘ (1993, p.954). This concept is labelled as
‗affective commitment‘. (Gonzalez, 2008)

46
 2.6.2.2 Calculative or continuance commitment

Unlike affective commitment, the cause of calculative or continuance commitment is the

assessment of switching costs of leaving the original counterpart in a relationship. If the
calculation of costs and benefits of available alternatives or substitutes of previous choice show
the higher gains for customer, then they have the higher possibility to maintain a relationship
(Bloemer & Dekker, 2007; Allen and Meyer, 1990; Geyskens et al., 1996). This means that
customers will calculate the benefit of stay and deduct the cost of leaving, if the result is plus,
then the customers will stay in the original choice as probably. As Kanter said, continuance
commitment involves ‗profit associated with continued participation and a ‘cost’ associated
with leaving‖ (Kanter, 1968, p. 507).

Next ‗continuance commitment‘ has been extended in two dimensions: ‗high sacrifice‘ and ‗low
alternatives‘. The high sacrifice means ―the personal cost of discarding and losing an investment
in an organization‖, and the low alternatives means ―there are few existing alternatives feasible
for the personal individual‖ (Hackett, Bycio, & Hausdorf, 1994; McGee and Ford, 1987; Meyer
and Allen, 1990).
Frutos & Miguel (1998, p.361) also conducted, a theoretical model with four separated scales:
continuance commitment 1 (cost of abandoning), continuance commitment 2 (low alternatives),
affective commitment and normative commitment, show a significant improvement in its
capacity of explanation. The measurement scales of ‗continuance commitment‘ are widened in
congruence with the new conceptualization. (Gonzalez, 2008)

2.6.2.3 Normative commitment

Normative commitment is referred as the moral obligation generated from a relationship (Allen
and Meyer, 1990). In line with Allen and Meyer (1990), Geyskens (1998) states that:

47
‗The use of global commitment measures-which measure intention to continue a relationship
without consideration of the underlying motivation-could confound or mask different, and
possibly even opposite effects‘ (Geyskens, 1998, p.50).

In addition, Wiener defined normative commitment as ‗the internalized normative pressure to

act in a way, which meets organizational goals and interests,‘ (1982, p.421). This has been
studied extensively, especially in the ‗psychological contract‘, which is the emotional bond
between an employer and employee (Rousseau, 1990).

The concept of ‗normative commitment‘ is widened, first by Penley and Gould (1988) who talk
of moral commitment as ‗acceptance of and identification with organizational goals’ (1988,
p.46). Later, Jaros et al. (1993, p.955) use the same term to describe ‗the degree to which an
individual is psychologically attached to an employing organization through internalization of its
goals, values and missions‘.

Such dimension is different from affective commitment because it is not necessarily an

emotional attachment, but reflects a sense of moral duty (Meyer and Herscovitch, 2001).
Nevertheless, there is no explicit reference to a moral internal judgment and behavior.

2.6.2.4 Relationships among the three dimensions

According to Allen and Meyer (1990), the Aristotelian distinction of human goods was divided
into three dimensions. The similarity between these dimensions is clear as they all describe and
strive to a specific course of action, hereon referred to as ‗commitment‘. The reason for human
actions specifically is explained by Aristotle as the concept of good being a goal or a conclusion
of an action. Hence, commitment can be explained as the three philosophical distinctions
described by Allen and Meyer (1990), that it can be based on the need or desire for useful and
pleasant goods together with the obligation in seeking for moral goods.

Affective commitment (desire), moral commitment (perceived obligation) and technical-

economical commitment (perceived cost-benefit) are the generally agreed upon three

48
dimensional terms of commitments. These terms are also categorized by Aristotle as pleasant,
useful and moral in terms of philosophical distinctions amongst the human goods. Hence the
terms may be seen or described as the psychological mind-sets established in the literature.
These similarities between the moral philosophy and psychology literature offer an excellent and
rational explanation for the three dimensions found from the study of the human action‘s logical
methods.

The difference between the moral and affective dimensions of commitment has been made clear
by Meyer and Herscovitch (2001) theoretically as the moral commitment being in the rational
moral perception and affective commitment as being in the sphere of desire and feelings. For
human behaviors, judgments and feelings can be seen differently, but still linked together as they
are human behaviors that cannot be separated and only distinguished as mind-sets constructs.
This is explained by the early originator‘s statement:

‗Affective, continuance and normative commitment are best viewed as distinguishable

components, rather than types, of attitudinal commitment; that is, employees can experience
each of these psychological states to varying degrees’ (Wasti, 2002, p.291).

In terms of Aristotle‘s distinction, commitment can be defined as the voluntary affection to an

entity or to a course of action due to perceived feeling, desire and impulse in searching for
pleasant goods. At the same time, this commitment is also the results of a perceived benefit or
the reduced analysis for useful goods and the perceived moral obligation as the search of moral
goods. If the analysis is focused on the role of the affective rational tendency, the three
dimensions can be only distinguished and not seen as separated terms. This is the clear indication
of the difference between affective and moral commitments.

Whetstone (2001) has described in business ethic literature as a tripartite approach that includes
norms, virtues and goods as a wider and more balanced concept of moral dimension within the
criteria of management. Aristotelian includes teleology (the consequence of human actions),
deontology (moral obligations) and virtues (character developments) as the three traditions in his

49
perspective of ethics. This classical philosophy concept is an excellent method to explain the
ethical dimensions of organizational commitments.

In recent approaches to organizational commitment, the implicitness of human free-will in

deciding specific courses of action is emphasized. It is considered that the explicit consideration
of the human will becomes vital in order to avoid stereotyped interpretations in explanations of
human behaviors that are incompatible with its related moral nature. Therefore linking a course
of action that is not voluntary cannot be said as commitment as ‗commitment‘ is a human action
(voluntary). However, there seem to be the question of coerced commitment to be a real
commitment or not? Since forced actions are not freely decided, there may be a kind of force that
binds an individual to an action, stated by Meyer and Herscovitch (2001), also states that if these
forces are not internal or is not desired by the individual the bound will cease as soon as the
external pressure ends. Therefore, it is vital that the decision is made by the individual internally
with free-will to further compliment the organizational commitment.

From Aristotle‘s perspective, it gives the opportunity to understand the role of commitment in
many sectors such as banking. It shows some elements that has included affective dimension
when decisions were constituted mainly in moral judgments. This analysis also allows for the
extension of the conception of morality from a normative approach to a broader aspect that
considers both moral goods and virtues. This emphasizes on the importance of knowing whether
it is a free-willed decision or coerced, as only free-willed human decision made for action is a
commitment, whereas without freedom‘s decision it would not be a real commitment but a
forced one.

2.7 Dual foci of commitment

Another conceptualization of commitment is the ‗focus (or foci) of commitment’. Foci of

commitment are the individuals or groups to whom a person is attached (Reichers 1985). People
could be attached to organizations, unions or occupations (entities)-Attitudinal commitment
(Meyer and Allen, 1997, p.9), or to some courses of action (e.g. continuing membership, goals or

50
policies) -Behavioral commitment (Meyer and Allen, 1997, p.9). Conclusively, commitment is
described including both aspects.

So far, much theoretical interest has been put on commitment of the employee to the
organization. However, an organization is comprised of numbers of components, for example-
owners, the profession, managers, work groups and customers (as Reichers (1985). Each
component plays its role and keeps its own goals. The commitment of employee towards
organization cannot turn into practical benefit for the organization, if the customer cannot feel
the service improvement the employees made. Therefore, ‗dual foci of commitment’ is necessary
to be emphasized on, added the customer commitment in the employee commitment. According
to Bremmels (1995) and Becker&Billing (1993)‘s view, ‗Dual foci of commitment’ could be
referred as a distinctive construct, keeping stronger power in explaining commitment than the
single foci construct. In addition, ‗Dual foci of commitment’ has important implications for the
relationship between an employee and customer (Organ and Ryan 1995). For example, if an
employee is committed to the organization but not the customer, then the stuff may serve
customer just out of organizational rules, and eventually impact negatively on the service
perceived by the customer. Hartline and Ferrell (1993) even said the over-stress on the employee
obligation (employee commitment) might negatively relate to the customer perceptions of
service quality.

In this study, we examine if it is appropriate to use this conceptualization of organizational

commitment where the focus of commitment is not to an organization. We use the example of
the commitment between bank staff and their clients and suggest that conceptualization of
organizational commitment may not fully reflect the operational meaning of commitment used in
this context.

51
 2.7.1 Organizational commitment

2.7.1.1 Concept

After review the literature and a descriptive listing of definitions proposed from different
approaches, Meyer and Herscovitch (2001) present a definition of commitment in the workplace
‗a force that binds an individual to a course of action of relevance to one or more aims‘ (Meyer
& Herscovitch, 2001, p.301).
That seems to be consistent with many of the previous descriptions of this concept.

Other expressions that also define some concepts in the specialized literatures are: ‗psychological
state‘ (Allen and Meyer, 1990, p.14), ‗psychological attachment‘ (O‘Reilly and Chatman, 1986,
p.493) or ‗psychological bound‘ (Mathieu and Zajac, 1990, p.171).

According to Porter, Steers, Mowday & boulian research (1974), organizational commitment
was defined as an individual‘s

‗(1) belief in and acceptance of organizational goals and values, (2) willingness to exert effort
toward organizational goal accomplishment, and (3) strong desire to maintain organizational
membership’ (Rune,2004, p.203).

In Porter et al.‘s conceptualization, which was manifested in distinguish the state of empirical
problem and intent to involve the variable. (Morrow, 1983) Some of studies have suggested to
limit the definitions to an employee‘s compliance (submit driven by reward and punishment),
identification (a desire for identify), and internalization (individual value compact with
organizational goal and value) (Becker, 1992; O'Reilly & Chatman, 1986; Reichers, 1985,1986).
Meanwhile, re-conceptualizing organizational commitment has been advocacy of the multiple
commitments view is also important (Ashforth & Mael, 1989; Cohen, 1993; Randall, 1990;
Reichers, 1985, 1986). For example, Reichers (1985) argued that the organization in
organizational commitment should not be viewed as ‗a monolithic, undifferentiated entity that
elicits an identification and attachment on the part of individuals’. It should be viewed as a
union of various groups and, therefore, ‗organizational commitment can be accurately

52
understood as a collection of multiple commitments to various groups that comprise the
organization‘ (Reichers, 1985, p.469). (Hunt & Morgan, 1994)

2.7.1.2 Antecedents

Once we know the focus of commitment, it makes sense to ask what the antecedents of
organizational commitment are. Following Meyer and Allen (1997) and Iverson and Buttigieg
(1999), three main antecedent groups could be distinguished:

(1) Organizational variables, such as the nature of a job, job design, human resource policies,
communication and participation policies, or manager behaviors;

(2) Personal variables, such as age, gender, tenure, job expectations, job values, kinship
responsibilities, affectivity and motivation toward work;

(3) Environmental variables like job opportunities.

However, empirical evidence shows mixed results that are sometimes inconclusive or weak, as is
the case with personal variables like age, gender or tenure (Meyer, Allen & Smith, 1993; Aven,
Parker & McEvoy, 1993); Mathieu and Zajac, 1990).

Following MacNeil (1980), we can find the antecedent of organizational commitment in

‗psychological contracts‘. These contracts, between organizations and individuals, could be of
transactional or relational nature. Like these authors emphasize, transactional contracts are the
antecedent of continuance commitment, while relational contracts explain normative
commitment. This idea is developed and extended by Cardona, Lawrence, & Bentler. (2004)
who propose ‗exchange relationships‘ as the antecedent of organizational commitment. These
authors add a third class of ‗exchange relationships‘ labeled as work exchange relationships that
reflect the individual‘s level of fulfillment while performing his job.

53
Knowing the antecedents explaining organizational commitment, we should focus on the
consequences of it. How can we observe commitment? Within the multiple commitments view,
what is the status of traditional organizational commitment, the kind of commitment conceived
as attachment to an overall organisation and measured by such instruments as the organization
commitment questionnaire (OCQ) (Mowday, Steers, & Porter, 1979) and the O‘Reilly and
Chatman (1986) scale? This question is important, if for no other reason because most empirical
findings are based on this conceptualisation and these measures. One possibility is that
organizational commitment is the same thing as the sum of an individual‘s commitments to all
the possible constituencies of an organisation- that is, it is nothing more than a shorthand way of
referring to the collection or sum of all commitments. Such a view would imply, for example,
that including both organizational commitment and an exhaustive list of specific commitments in
a multiple regression analysis is redundant. In testing this sum of commitments
reconceptualization, Reichers (1986) found that ‗the interviews that were done seemed to capture
the important (if not all) relevant constituencies, yet substantial variance in organizational
commitment levels remains unexplained‘ (Reichers, 1986, p.513). Therefore, she suggested that
commitment in the organisation ‗may perhaps be most accurately understood as a general (global)
and a specific (commitments to one or more constituencies) construct‘ (Reichers, 1986, p.513).
Reichers's findings concerning the nonredundancy of glohal organizational commitment were
later supported by results of Becker‘s (1992) regression analysis of employees‘ global
commitment to an organisation and three specific constituencies: work groups, supervisors, and
top management.

Recently, most organizational commitment literature analyses outcome behaviors such as

turnover, absenteeism, job performance, organizational citizenship behavior (OCB) and/or
change acceptance (Iverson and Buttigieg, 1999), that are, principally, measures of action versus
omission decisions. Nevertheless, some published findings pertaining to organizational
citizenship behavior literature show OCB as an outcome of organizational commitment (Shore
and Wayne, 1993). However, one of the clearest demonstrations of the relation between
commitment and OCB can be found in Cardona et al. (2004), who demonstrates that the level of
attachment to a job, and to an organisation, are good predictors of OCB behaviors.

54
Organizational commitment can be defined as a psychological attachment or bound, that is the
result of a personal voluntary decision, based on calculated rationality, affective tendencies and
moral judgement, which conducts to a higher or lower degree of identification with, and
involvement in, a particular organisation, and that is observable throughout free effort extended
in accomplishing organizational goals.

This proposed definition of organizational commitment is consistent with the most accepted
multidimensional model offered by Allen, Mayer and collaborators. The tripartite mind-set of the
concept remains intact, and also the idea of different degrees or strengths to pursue a course of
action; but we suggest a philosophical Aristotelian foundation for the presence of the three
dimensions. Taken root in the same tradition, we propose a distinction between the affective and
moral dimensions of commitment, the first belonging to the sphere of feelings or emotional
tendencies, and the second to rational tendencies.

2.7.2 Commitment of the employee to customers- ‘Commitment-trust’ theory in relationship

marketing

The growth in popularity of relationship marketing has been explained as a result of the changing
market environment, including intensified competition, market structure caused by deregulation
and the more sophisticated customers (Shapiro, 1991). Most early marketing theory is based on
US context with focus on employment of marketing mix (Borden 1965). However, with the
increasing demand on relationship research, marketing mix seems inadequate or inappropriate to
explain the market phenomenon in service business (Payne, Christopher, Clark and Peck 1995).

In response to this shift in emphasis, research on the topic of relationship marketing has become
increasingly important. A substantial literature has developed in this area including numerous
articles, books and special issues of journals (Pressey and Tzokas 2006). One key aspect of
relationship marketing is the recognition of long-term relationships. Authors in the services
marketing literature (Berry, 1983) suggest that it is important for organization to retain the
valuable customers in highly competitive market. Some writers suggest that, especially in mature

55
businesses, there should be a change in emphasis from customer acquisition to customer
retention (Christopher, Payne and Ballantyne 1991).

Furthermore, Sheth and Parvatiyar (1995) pointed out that it is necessary to examine the reason
that consumers choose a supplier and engage in the relational behavior. Given that, the
‗commitment-trust‘ theory of relationship marketing could answer the reason for such relational
behavior. This work identifies that successful relationship development includes two key
components – relationship commitment and trust. Since commitment and trust lead to co-
operative behaviors directly as mentioned before, so building commitment to bank among
customers are vitally essential for long-term development of a bank. These authors use the
definition of commitment suggested by Moorman et al., (1992), which reflects that of Mowday
et al. (1979). This definition emphasizes the desire to remain in a relationship as well as the
emotional bond with the other party in the relationship.

In their work, Morgan and Hunt (1994) emphasize the organization needs to promote
commitment and trust in order to develop a cooperative network of customer relationships.
Compared with more traditional marketing theory, that suggests market relationships are
described as the power of one partner over the other. They suggest that since members in a
relationship are compelled to do and they want to do so.
The coercive power of commitment gives fulfillment between partners.

Trust can be defined as one party‘s confidence in the other relationship members reliability,
durability, and integrity, and its action of the belief that are in the best interest of and will
produce positive and assured outcomes for the trusting party (Peppers and Rogers, 2004).
Morgan and Hunt (1994) has conducted that trust and commitment are key variables for
businesses, since they:

‘a) encourage marketers to work at preserving relationship investments, b) resist attractive

short-term alternatives in favor of the expected long-term benefits of staying with existing
partners and c) view potentially high risk actions as being prudent because of the belief that
their partner will not act opportunistically.‘(MacDonald & Smith, 2004, P. 111)

56
Schoultz, Tannaenbaun and Lauternorn (1997, P.141) describe commitment as an internal
expression of interest in either the marketer‘s brand or related category; while Peppers and
Rogers (2004) describes Commitment as the significance in maintaining a relationship between
each other with maximum effort. In contrast, when a customer is committed to a firm or supplier
even if mistakes were made or were other substitute alternatives in the market is true
commitment (Henning-Thurau and Hansen 2000).

In addition, Garbarino and Johnson (1999) give a further enhancement to the ‗commitment-trust‘
theory. It is suggested that trust and commitment are vital in forecasting future behaviors of royal
customers with consistent re-purchase; at the same time, for occasional customers satisfaction is
more important than commitment or trust. Thus having commitment or trust is more effective
than building long-term relationships. A good example is the relationship between banking staff
or accountants with their clients. According to Bessant (2005), this sector of profession is now a
fast growing industry with its GDP in UK generating twice more than before. The origin of
professions is that of groups of people that is joined together to practice their occupation with
training that is specifically designed to them under the rigorous ethical and knowledge standard
basis. Hence, the result of relationships is being based on implicit trust and commitments
between the two parties. As Halinen (1997) notes the fact that the banking professionals service
firms are increasingly being noticed as excellent examples of relationships where the two parties
shows the relationship between commitment and trust evidently.

Conventional definition of a profession and banking professionals emphasizes that there is a

shared knowledge platform, autonomy in the application of that knowledge, commitment to a
specific line of work, identification with the occupation, responsibility to the society for the
ethical use of specialized knowledge and collegial maintenance of performed standards.
Historically evolved their own code of ethics and standards for members and this is an important
part in the gaining of their clients‘ trusts. Sheth and Sobel summarize and describe the attributes
of successful banking professionals as:

57
‗The two foundational attributes for any banking professional who aspires to serve clients are
selfless independence and empathy they (successful banking professionals) are dedicated,
loyal and focus on their client’s agenda, not their own.‖ (2000, p.38).

There are not many examples of research into commitment within the banking profession.
Maister (1997) provides additional insights about the attributes of a successful banking
professional. The emphasis is on the importance of values and passion for client assistance. In
addition, client as the judge of banking professionalism is noted by Maister (1997) as well,
regarding the intentions of the banking professional:

‗Successful (banking professional) firms are clearly differentiated by a strict adherence to values,
i.e. to banking professionalism…New business will be won only to the extent that the client
believes that the banking professional is interested, cares and is trying to help…Believe
passionately in what you do, and never knowingly compromise your standards and values. Act
like a true banking professional, aiming for true excellence, and the money will follow‘ (Maister,
1997, p.11).

Potentially banking staff is a great example of commitment amongst the professions because of
the nature of banking service, which are very specific obligations to fulfill by the banking staff
with competence of duties and care. Thus banking services usually requires the banking staff to
over many transactions to learn and acquire knowledge of their clients.

As Halinen (1997) notes, the relationship between commitment and trust is crucial for the
banking professional service; with in depth research of the banking industry, it is noted that the
trusting behavior of one party in likely to increase the attraction and commitment of the other
party; while the commitment behavior may assist in increasing or restoring the trust between
both parties. However, this contrasts with Morgan and Hunt‘s (1994) theory that commitment is
a predecessor of trust.

Per Moorman, Zaltman & Deshoande (1993) and Buttle & Burton (2002), there is a positive
relationship between loyalty and trust; satisfaction and trust (Ganesan, 1994; Jyh-Shen, 2004);

58
satisfaction and commitment (Fornell, 1992); commitment and loyalty (Bolemer & Oderkerken-
Schroder, 2003; Berry & Parasuraman, 1992; Mcllroy & Barmett, 2000), trust and commitment
(Pepper & Rogers, 2004; Morgan & Hunt,, 1994; Halliday, 2003). However, there has been no
evidence for which variables that will have greater impact on bank guest loyalty, as well as the
variables for satisfaction and loyalty needs to be determined.

2.8 Nature of commitment

There are many studies that examine the nature of commitment in the industry of services. As
Kanter (1986) and Allen (1991) mentions that many literature for this organizational behavior is
extensively explored in the aspect of the employees‘ commitments to their jobs and
organizations.

Allen, Meyer and collaborators (Allen and Meyer, 1990; Meyer et al., 1990; Meyer and Allen,
1991) tries to emphasize and synthesize the three research lines: first, Porter et al. (1974, P.604)
has focused on attitudes – ‗ the strength of an individual‘s identification with and involvement in
a particular organization; second, taking into account the focus in behaviors (Becker, 1960,
P.33) – ‗ consistent lines of activity‘ based on the individual‘s recognition of the cost of doing
otherwise. Lastly, using Wiener (1982, P.471) a definition focused on believes – ‗Totality of
internalized normative pressures to act in a way, which meets organizational goals and interest‘.
Individuals show these behaviors because according to Wiener (1982, P.421), it is the ‗right‘ and
moral thing to do.

An important distinction between attitudinal and behavioral commitment is described by Porter

and Steers as:

‗attitudinal commitment focuses on the processes by which people come to think about their
relationship with the organization … behavioral commitment, on the other hand, relates to the
process by which individuals’ become locked into a certain organization and how they deal with
the problem’ (1982, p.26).

59
There has been little attention to the understanding of commitment in relationships between
suppliers and customers in comparison to the large volume of research done for commitments of
employees to the organization. The concept of ‗service profit chain‘ is proposed by Heskett,
Jones, Sasser and Schlesinger (1994) the constructs that connects the models – ‗management
practice, employee attitude, customer behavior and business performance‘ together. Which this
model does not involve the commitment behavior as a construct. However, it suggests that
employee productivity decreases costs and increased customer perceived value for service. Thus
the connection between customer satisfaction and retention is linked. This has significant
meaning for the banking industry as employees that has great knowledge of their customers will
be able to provide a better customer service, in turn, the customers will be more satisfied with the
service, thus sends positive feedbacks back to the bank employees. This is rather significant in
terms of understanding commitment, as productivity and retention are crucial factors related to
commitment. The twenty-nine banking professional service firms sees the link between the
employees‘ commitments and financial performance (Maister, 2001). It is established that
successful firms excelled in management of their own banking professionals. It was concluded
that high performing firms also promoted enthusiasm and higher morale in the employees‘
behaviors (Maister, 2001). This in turn leads to stronger commitment to clients, employee
development and team work.

The investigation of the meaning of commitment is crucial for this paper especially used in the
context of banking service and its clients, particularly the focus on the relationships between the
bank staffs and their related clients in the banking industry. It identifies that the actual meaning
of commitment used by both partied is more complicated than previous explanations.

In the study, Weick (1995) describes the ‗meaning of commitment‘ is approached in terms of
‗sense-making‘ to be ‗logical‘. It is suggested that by establishing a speech language for a subject
the phenomenon becomes real. Also, the experience that allows the actor to construct and
demolish many ‗objective‘ features of their environment, thus a set of rules formed which guides
future behaviors. Weick (1995) also states that sense making involves both a cognitive process as
well as action to reaffirm the actors‘ beliefs. In the studies presently, the ‗sense-making‘ process

60
was used to explore individual descriptions of commitment and consider how it is presented
within a specific service and relationship transaction.

In more detail, the five statuses discussed in the relationship between banking professionals and
related clients, in order to explore the meaning of commitment in banking industry:

Firstly, the relationships between banking professionals and their clients are often long-term,
dedicated and participative. These three key points are often associated with high commitment
relationships (Beaton and Beaton, 1995). Thus a banking professional tends to perform superb
jobs for their clients with much commitment (Nelson, 1988).

Secondly, the skills and knowledge of banking professionals are strongly demanded and the
services delivered are usually intangible with high complexity. Although some times the
customers do have enough knowledge to support their assessment of bank professionals‘ services.
At the same time, sometimes the technology quality is not easy to be identified by customers, the
behavior of banking professional does affect the customer‘s judgment for the value of service
(Freeman and Dart, 1993). Hence the method of service by the banking professional is utterly
important. The commitment behavior of banking professional helps to determine a client‘s
perception of service quality. Hence, this will make a bank suitable for examination in the
meaning of commitment used in the relationship between banking professionals and their clients.
The perceived commitment of the banking professional may impact the value assessments by the
clients.

Third, the characteristics of these banking professionals and their organizations are particularly
related to examining commitment. For example, professions such as law firms, partnership firm,
this would also mean that the equity partners‘ provides a financial investment firm. Thus being a
co-owner of the firm, the partner needs to be stable and stays long-term in the organization, and
sometimes participates in strategic decision making. Thus making them more likely to be
committed to the organization and developing successful relationships with the clients.

61
Fourth, with the trends changing towards the relationships in banking sector, this indicates that
the commitments between clients and banking staffs are being more crucial (Maister, 1997). It is
suggested that it is important to know the nature of the commitment in the relationship. For
example, Maister (2000) it indicates the bank staff is becoming more committed to selected
clients, fulfilling many vital roles as a business partner and advisor. The strategic roles fulfilled
by advisors results in the clients‘ tendency to choose and remain with to build long-term
relationships with the banks (Gibbons, 1989). There is also a continuous trend towards
specialization by banking professionals in particular domains such as specialist financial service.
Both banking staff and clients also invest time and mutual commitments especially when large
organizations need specific advices (Beaton & Beaton, 1995; Dart, 1995). Investments added
may result from the change in service delivery process (Wallace, 1995). For example, banks
invest in computer systems linked to the clients‘ systems, thereby enabling them to produce and
exchange documentation that conforms to their clients‘ systems. This requires an investment of
resources to their client relationships.

Fifth, with little research done on the commitment of the relationship between banking
professionals and clients, it is surprising as taking into consideration that the rapid growth of
banking professional services within the economy (Frow, 2007). Work in this area has largely
focused on conflict of commitment between the relationships held by the banking professional
internally within the organization and externally within the profession (Wallace, 1995). Some
have focused on the one participant‘s commitment behavior and the outcome experiences by the
other, and few have addressed commitment from both sides of the relationships between the two
parties. Thus additional empirical work is vital for the examination of the process that underlines
successful relationships within banking professional services. (Frow, 2007)

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 Chapter 3: Conceptual Framework and Research Method

The paper aims an explanatory study, testing the question that whether commitment plays the
mediating function in transferring customer satisfaction into customer loyalty in banking sector
of Taiwan.

Since the research reflects principles of positivism, then the philosophic system in this research
is Positivism focusing on the ‗positive facts and developments, other than holding that
speculation on ultimate causes or origins’ (Dubé & Paré 2003, p.597).

Under such philosophy, the following measurement and composition of constructs, Moderator
Variables, sampling, data collecting and sets of analysis are conducted.

3.1 Research Setting

Taiwan is an international and regional services hub as well as a control center for production in
the region. Taiwan is now a technology based higher value-added economy. It is also one of the
most service-oriented economics in Asia due to its significant growth experienced by its services
sector in the past twenty years.

Banks of Taiwan, in accordance with the law, is divided into five categories: Central Bank,
commercial banks, savings banks, specialized banks and trust and investment companies. The
function of Savings Bank is to receive deposits and issue financial bonds to absorb national
savings and supply the medium and long-term credit, such as Shanghai Commercial and Savings
Bank and the saving department of other banks.

There are some characteristics of the banking sector or banking institutions in Taiwan:

1) The structure of banking institutions in Taiwan is based on the regional branch banking

63
system;

2) Most banks develop comprehensive business, and even specialized banks are also dominated
by the commercial banking business. All kinds of banking business have been crossed among
various banks.

3) Before 1990, the major banks are public-owned and government-operated. Of Taiwan‘s 16
local banks, there are only four private banks (however, the private banks like International
Commercial Bank has high proportion of government-owned stocks). The small and medium-
sized Private Bank has number of seven, but all are local banks. The amount of total assets of
these private banks are even less than the small and medium-sized public sector banks. Private
banks only dominate in the trust and investment companies sector.
But, in 1991, the government of Taiwan deregulated from setup and control of the bank industry.
Many new banks were established soon after two years. There were forty-two banks in Taiwan,
in the end of 2006. (Financial Supervisory commission Executive Yuan, ROC, Banking bureau,
annul report, 2006)

The main source of funds of Taiwan banks is corporate and individual deposits, government
deposits, foreign liabilities, and ‗Central Bank‘ liabilities. Most commercial banks and trust &
investment companies take the deposits as main source of fund, of which the corporate and
individual deposits keep the largest weight, accounting for about 60%. Owing to the competitive
banking environment, maintenance of multiple banking relationships tends to be common
practice amongst business corporations in Taiwan.

However, As recent ‗United Evening News‘ of Taiwan reported, according to Fitch credit rating
report, the interest rates Taiwan's banking sector in 2009 was estimated at -0.5%, with the worst
profit performance in Asia this year. The financial management of Taiwan is worse than
Singapore and Hong Kong; in terms of product diversification, product design ability and risk
control, Taiwan is also not as good as Hong Kong and Singapore.

64
3.2 Research design

Correlational analysis was applied as the study was conducted to investigate the relation between
retail customer‘s commitments and trust in a banking relationship and the various precursors
identified. Interview questionnaires were distributed to a randomly selected sample of retail
customers in Taiwan, to obtain scores from each subject for each of the dependent variables-
commitment and each of the dependent variables. The variables distribution of each pair of
scores was analyzed using SPSS statistical tool to determine the correlation coefficient, or the
index of strength of association between the two variables. No control was exerted over the
phenomenon under investigation hence the research design used was correlational design and no
inference could be made of the existence of a casual relation between any independent and
dependent variables that were found to be associated.

As the method of data collection, questionnaires were used as they offer. Its following advantage
over other alternatives are: cost, ease of establishing contact, ability to research the multitude,
geographic coverage, ease of completion, less bias, familiarity to the respondents, and uniform
question presentation (Berdie & Anderson, 1974)

3.3 Research model

First of all, we discuss the two variables constructing the ‗customer satisfaction‘:

LeBlanc and Nguyen (1998) have researched and evaluated quality in financial institutions and
suggested a conceptual model of service quality: service quality is argued to be concerned with
the physical environment, performance of contact personnel (that lies in the staff‘s attitude and
behavior) and finally perceived quality is argued to relate to the customer satisfaction derived
from the service. The evaluations of quality result from the outcome of the services and the
process of service delivery. The negative attitude results when perceived performance falls short
of expectation, whereas, positive attitude generate when perceived performance exceeds
expectation, resulting customer satisfaction (Oliver, 1980). Therefore, ‗service quality‘ must be
involved as a variable of customer satisfaction.

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 Customer satisfaction

Attractiveness of alternatives Service quality

H2 H1

H6
H5:
Positive
Continuance relationship Affective
commitment commitment

H4 H3

H7
H6

Customer loyalty

Figure 3.1: Research model

The ‗attractiveness of alternatives‘ is also an important variable of customer satisfaction. Many

research (e.g. Chipunza, 2008;Huang, 2007; Bloemer & Dekker, 2007; Auh & Johnson, 1997;
Geyskens et al., 1996; Allen and Meyer, 1990) found that although people feel satisfied in
certain service provider, e.g. bank, they still have the possibility to switch their service provider

66
and the possibility would be higher when the competition is more intensified. Therefore, we
cannot ignore the impact of ‗attractiveness of alternatives‘ on the attitude of customers, so that it
is made as one variable of customer satisfaction in this research.

The three dimensions of commitment play different roles depending on the context (Allen &
Meyer, 1990). In this case, the two dimensions of affective commitment and continuance
commitment are employed. The normative commitment is not adopted since banking business is
largely related to the feeling of trust/ safety and benefit calculation, while the moral obligation is
thought to have weak influence on the customer decision (Huang, 2007); moreover, there is
complicated relationship exist between the normative commitment and continuance commitment
or affective commitment. In order to clarify the research model, based on the above two reasons,
we leave out normative commitment.

In this model, the service quality is closely related to the affective commitment. In fact, the
positive attitude for the perceived service could meet customers‘ psychological needs, and
eventually stir up the affective motive to keep a strong relationship or attachment, that is
affective commitment. (Allen & Meyer, 1990; Wasti, 2002). The research point is weather the
affective commitment play the mediating role that transfers the positive attitude (customer
satisfaction) into more desirable outcome, such as consistent re-purchase behavior (customer
loyalty).

Accordingly, attractiveness of alternatives has great impact on the continuance commitment,

since continuance commitment depends on customers‘ monetary consideration of cost linked
with a certain relationship kept with a bank (Van Dam, 2005). Generally there are two
dimensions for the attractiveness of alternatives. Some studies point out that the lack of existing
alternatives is the main dimension of continuance commitment (e.g. Dunham, Grube &
Castaneda, 1994; McGee & Ford, 1987); The latter dimension, Allen & Meyer, (1990) argue that
continuance commitment is derived, for the most part, from the market status of lacking good
alternatives. If the amount of alternatives increase, or the service that alternatives offer is relative
good, the continuance commitment could be easily weakened (Dunham et al., 1994) and possibly
decrease the re-purchase behaviors (customer loyalty). However, this study focuses the

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dimension latter (that is, whether the service alternatives offer is relative good), and re-define the
construct of continuance commitment and treats the former dimension as antecedents of
continuance commitment.

Hence, we propose the following hypothesis:

H1: There is a positive relationship between ‘service quality’ of banking service and
affective commitment of customer.

H2: There is a negative relationship between ‘attractiveness of alternatives’ of banking

service and continuance commitment of customer.

Barksdale, Johnson, & Suh (1997) conducted an empirical study in the health care industry and
found the evidence of the positive relationship between the customer commitment and customer
loyalty. Similarly, Meyer, Allen & Smith (1993) argued that since both of affective and
continuance commitment refer to association with relationship in their definitions, both of them
are proved to be negatively correlated with intention to switching behaviors of customers. In this
research, the evidence of such relationship in the banking industry of Taiwan market is to be
found. Hence, we propose the following hypotheses:

H3: There is a positive relationship between affective commitment of banking service and
customer loyalty.

H4: There is a positive relationship between continuance commitment of banking service

and customer loyalty.

As mentioned previously, there are two dimensions existing in the construct of ‗attractiveness of
alternatives‘, that is, ‗lack of existing alternatives‘ and ‗personal sacrifice linked with switching
behaviors‘. Affective and continuance commitment are believed to relate the two dimensions
significantly, especially the former dimension (Huang, 2007; Frow, 2007). For example,

68
consumers would transfer the affective commitment into psychological cost and then uphold the
relationship out of their psychological need. Hence, we propose the seventh hypothesis:

H5: Affective commitment of banking service is positively associated with continuance

commitment.

Recently, many studies as to the role of commitment in different background, share the similar
conclusion: commitment is the key mediator for customer satisfaction transferring into customer
loyalty (e.g. Hunt and Morgan, 1994; Malhotra & Mukherjee , 2003; Valenzuela & Vasquez-
Parraga, 2006; Huang, 2007). In order to investigate the mediating role of commitment in
Taiwan banking industry, we propose following hypotheses:

H6: The influence of satisfaction on customer loyalty is mediated by affective commitment.

H7: The influence of attractiveness of alternatives on customer loyalty is mediated by

continuance commitment.

3.4 Measures of constructs

Most of the constructs in this study were measured by means of multi-item scales. Item
generation was based on a review of the extant literature. In order to assess measurement validity,
all items were measured by a 7-point Likert type response format (7 means strongly agree and 1
means strongly disagree), with items coded such that a higher score showed a greater amount of
the empirical investigation. (Restuborg, Bordia, & Tang, 2006)

Established scale items for commitment were adopted as appropriate; while scale items for all
the independent variables, or precursors of commitment were developed specifically for this
study, basing on the literature reviewed and the related discussions earlier.

Questionnaires were constructed basing on the principle that:

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 ‗The environment, knowledge, and actual behaviors, as well as the level of consciousness in
the respondents, all form the parameters of the total picture of the respondent’s operating reality,
and they comprise the total questionnaire. ‘(Labaw 1980, p.32)

Other guidelines observed in constructing the questions included ensuring that only one concept
or issue or meaning was included in a question; and that generic words conveying multiple
meanings were avoided (Labaw, 1980)

The draft questionnaire was discussed with the managing director of an established import firm,
and the finance director of a large company engaged in manufacturing and trading. Basing on
their comments subtle changes were incorporated before the questionnaires were finalized for
distribution.

3.4.1 Measurement of customer satisfaction

SERVQUAL is a multiple-item scale for measuring service quality. It is based in one of the
popular and most valuable contributions to the services quality literature, the ‗gaps model‘ of
service quality The model describes service quality as a function of the several gaps that link
customer expectations to the customer‘s perception of the service that is provided. Overall, the
development of SERVQUAL can be categorized as seeking to produce an instrument that can be
used to measure the customer satisfaction. (Parasuraman et al., 1985).

Before going further, some clarification of terminology that has been used rather loosely in
literature is in order. We view service quality as a construct, the five dimensions in gaps model
of service quality as a conceptualization of that construct. Because SERVQUAL has been a
major force in shaping the service quality literature we have chosen to use it as the focus of our
discussion of service quality.

SERVQUAL is organized around five dimensions: reliability, responsiveness, Msurance,

empathy and tangibles. Parasuraman et al. (1988) compared regression data across four

70
companies to determine the relative importance of the five SERVQUAL dimensions. In chapter
2, a brief description of each dimension has been provided.

3.4.2 Measurement of attractiveness of alternatives

Switching behavior is a much-discussed topic in the researches. The psychologists, consumer

behaviorists, marketers, and economists were interesting in its antecedents, implications,
determinants, and correlates. The basic ideas behind the concept of switching behaviors were,
under certain assumption, which people tend to pursue a variety of life (Faison, 1977). When
people seek such variety, a single brand not normally meets their needs and desires, and
ultimately lead to the same switching behaviors in a number of brands (Feinberg, Kahn, &
McAllister, 1992). Thus, customers were seeking a variety of product selection in order to avoid
feelings of monotony and boredom (Menon & Kahn, 1995; Homburg & Annette,2001).
Switching behaviors were seen as an inherently dynamic phenomenon (e.g. McAlister &
Pessemier, 1982; Malhotra & Mukherjee et al., 2003).

Therefore, the switch behavior is generated due to the lack of functional or instrumental values
of service that original provider supplied (van Trijp, Hoyer & Inman, 1996), even if the customer
satisfaction could achieve the original service (Raju, 1980; Steenkamp & Baumgartner, 1992).
The intrinsic motivation of switching behavior refer to a customer switches service providers not
only for the reason of time/ monetary factors, but also the different degrees of stimulation of a
new purchasing desire customer. Therefore, in this study, we recommended that the variety
drives of customer would affect the relationship between satisfaction with the product/ service
and loyalty.

.Because the switching behavior has been regarded as a product-related phenomenon, which
meaning that people need to this species with a high intrinsic motivation in some product
categories, (van Trijp, Hoyer, & Inman, 1996), there is no moderating effect of switching
behavior on the linkages between satisfaction with the sales process or satisfaction with the after-
sale service and loyalty.

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As mentioned in chapter two, the level of customer satisfaction not only the perceived quality of
current service provider but also the relative attractiveness of alternatives (the quality of
alternative means the best possible alternative relationship). Typically, high degree customer
satisfaction indicates the high satisfaction level of original service quality and low assessment of
alternatives (Farrell & Rusbult, 1981; Rusbult & Farrell, 1983). By comparing the returns and
costs of switching, customer decide whether to maintain a relationship within a service
organization.

According to different type of switching barriers, the customers switch service provider out of
different reasons. In general, economic consideration is the first priority when people do
comparison among the service providers. Economic consideration might include a profit to
maintain the existing relationship or the cost of quitting it, such as the initial investments, interest
rates, discounts. In addition, the time factors (the distance away from home/office; the simplicity
of certain process) and Psychology factors (such as the feeling of safety, ethic, and reputation)

In this study we measure the attractiveness of alternatives, according to three dimensions:

1) Time factors;
2) Monetary factors;
3) Psychology factors

3.4.3 Measurement of affective commitment

Many researched in recent years had focused on affective commitment as a central variable in
influencing purchasing decisions (e.g. Menon et al., 2007; Chipunza et al., 2008 ; Homburg &
Annette,2001)).

The concept of affective commitment had been discussed for decades and even longer in the
consumer-behavior literature and psychology (Muncy & Hunt, 1984). Although some studies do

72
not agree with the precise definition of affective commitment, most researchers agree that the
level of affective commitment is associated with the level of perceived personal relevance or
importance of a specific product category to the customers (Flynn & Goldsmith, 1993; Gotlieb,
Schlacter, & St. Louis, 1992). The current theory is that a high customer affective commitment
in a product will lead to extensive interest in and search for product-related information ( Bloch
& Richins, 1983; Mittal, 1995; Richins & Bloch, 1986; Homburg & Annette,2001).

Thus, affective commitment was expected to moderate the linkages between not only the
satisfaction with the sales process, but also with the after-sale service and loyalty. (Bloemer,
Pauwels & Kasper, 1996; Homburg & Annette,2001)

Huang (2007) conducted a empirical study in banking industry, and stated that the degree of
commitment determine the probability of individual‘s switching behavioral and intention: If the
customers‘ commitment with certain bank is ill established, the customer relationship is easily to
split.

According to Huang et al.‘s research, we establish four dimensions for the construct of affective
commitment:

1) Discount dependence;
2) Customization dependence;
3) Personal preference;
4) Emotional correlation

3.4.4 Measurement of continuance commitment

As mentioned earlier, continuance commitment or so called calculation commitment is to

evaluate the switching costs of leaving certain relationship. If the calculation of costs and
benefits of available substitutes or alternatives of previous investments show the higher
advantages for customer, then they have the higher likelihood to develop a relationship with an
alternatives or substitutes. (Allen and Meyer, 1990; Geyskens et al., 1996, van Dam, 2005)

73
According to Dunham et al., (1994) and McGee & Ford (1987), continuance commitment is a
multi-dimensional form which includes how many existing alternatives and ‗personal sacrifice‘
of leaving the original relationship.

Thus, referred to the works of McGee & Ford (1987) and Dunham et al., (1994), this study
measure continuance commitment by two dimensions:

1) Number of existing alternatives

2) Personal sacrifice for switching original service provider

3.4.5 Measurement of customer loyalty

A multi-dimensional scale used to measure customer loyalty. As discussed earlier, previous

study suggested that customer loyalty consists of behavioral and attitudinal component. A
customer‘s positive attitude toward a certain vendor‘s product is captured through his initiative
to recommend the product to others.
Therefore, it was suggested that proposed behavior occurs when the customer has a positively
attitude toward a product and feel that the product is as being superior to alternative suppliers
(Dick & Basu, 1994). In addition to the recommendation behavior, the customer intent to
repurchase the product is conceptualized—the means to customer's loyalty to same provider.
Previous work was focused on consumer durables (such as Johnson, Herrmann, Huber, &
Gustaffson, 1997) shows that, in addition to repurchase and recommendation of the product itself,
the intention of remaining loyal to the provider comprised another important component of
customer loyalty. (Homburg & Annette,2001)

There are a variety of factors that affect a customer‘s loyalty; therefore measuring loyalty solely
by repeat post purchase does not always result in a propensity to be loyalty (Howell, 1996)

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Similarly, Oliver (1980) states that three factors would impact customer loyalty: 1) The previous
intention to purchase; 2) The satisfaction level; 3) The current attitude.

In term of customer loyalty, Jones and Sasser (1995) conducted research into customer loyalty
and measured it in 3 items:

1) Intent to repurchase
2) Primary behavior (actual repurchase)
3) Secondary behavior (referral, recommendation and third parties)

In this study we adopt Jones and Sasser‘s theory, and adapt the three dimensions into two that is:

1) Intent to repurchase
2) Recommendation

3.5 Questionnaire design

The questionnaire of a quantitative study should seriously assess the parameters involved and be
compiled in detail. The method of survey questionnaires was used mainly due to their high
flexibility and low heterogeneity.

In this paper, the questionnaire (appendix A) attempts to amalgamate and build on previous
research in service quality and customer satisfaction literature, and focuses on the effect of
customers‘ commitment in the relationship of customer satisfaction and customer loyalty.

The five questionnaires employed have been adapted from the previous works, as following:

1 Based on 22 questions of SERVQUAL developed by Parasuraman et al. (2003), the

measurement of service satisfaction was adapted for banking industry in Taiwan.

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2 Based on SERVQUAL questions and Jones, M. A.; Mothersbaugh, D. L.; Beatty, S. E. (2000)
on the switching behavior, the dimension of attractiveness of alternatives is added into the
construct of customer satisfaction.

3 Based on the instrument study of Garbarino & Johnson (1999) and Allen & Meyer‘s (1990),
the dimensions of affective commitment is developed.

4 Based on the research of Dunham et al (1994), McGee & Ford (1987) and Wasti‘s (2002) on
continuance commitment, the two dimensions of ‗personal costs associated with leaving‘ is
added to the construct of continuance commitment.

5 From the view of Oliver (1999) and Jones & Sasser (1995), we add dimensions of customer
loyalty.

Each of these questionnaires above has been ratified on a number of occasions/topics, showing
the relative high reliability and validity. They are believed suitable to be adapted to form the new
questionnaires in this study.

With a combination of organization information, and personal demographics, the type of

questions used were closed-ended questions to avoid problems such as various variations in
answers that make coding complicated. To obtain reliable and valid measurements, then a seven-
point Likert scale is used to measure each dimensions for the constructs.

Through the proper adaptation from previous questionnaires, a set of questionnaire had been
developed for this study, which was contained five parts:

1 Part one, is related to the personal particulars of interviewee, including demographic

characters such as gender, age.

3 Part two is related to the self -perceived assessment on the service quality of the banking
service provided by the bank or bank branch the interviewees visit frequently most. This part

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includes 5 dimensions (Tangibles; Reliability; Responsiveness; Assurance; Empathy) and 26
questions.

3 Part three, aims at measure the switching behavior exist between the domains of customer
satisfaction and customer loyalty. The attractiveness of alternatives has been seen as the indicator
of level of switching behavior. This part includes 4 dimensions and corresponding 4 questions
(two more questions are added after pilot study).

4 Part four, is related to the level of affective commitment of customers toward the bank or
bank branch the interviewees visit frequently most, including 3 dimensions (Time factor;
Monetary factor; Psychology factors) and 3 questions.

5 Part five, aims at measure the continuance commitment of customers toward the bank or bank
branch the interviewees visit frequently most; 4 dimensions same as the operationalization of
constructs listed before, and 4 questions are included.

6 Part six, is related to the customer loyalty toward the bank or bank branch the interviewees
visit frequently most; 2 dimension and 2 questions are included.

A cross-sectional survey and 317 questionnaires are used to collect data. The questionnaires are
finished through the high street interview. After data collection, the statistics processing and
analysis of findings will be conducted.

3.6 Pilot survey

According to Sekaran (2000), pilot study involves the use of a small number of respondents to
test the appropriateness of the questions and their understanding. Conducting a pilot study helped
to rectify any adequacies in time and wording before administering the questionnaire to a large
number of respondents.

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Having to use the reliable scale of the extended SERVQUAL dimensions, it would still be
necessary to have a pilot test to ensure that the questions set on the survey questionnaire is easily
comprehensible by all respondents.

Therefore, a pilot study was conducted to first 100 participants of this survey. In order to ensure
face validity and content validity for the questionnaires, a short interview with tutors and
classmates are conducted as the pre-test. Two special questions, indirectly linked with the
research topic, are located at the beginning of the questionnaire: the first one is related to
whether they have actually established a commitment with any bank (if not, respondents would
finish the interview); the second question requires respondents to choose one specified bank or
bank branch with which they most frequently visit.

Having spoken to the participants it was agreed that their responses could be included in the
survey proper, as each participant did not think their responses would be change in the near
future. Therefore, the 100 pilot samples were included into the full samples, and it is conflict to
the principle of quota sampling.

3.6.1 Feedbacks of participants

The feedback received was extremely helpful. The survey‘s extended SERVQUAL instrument
had to be modified as the people who pre-tested it had the following comments:

1) Q 12(How often you have to queue) and 13(The length of time you have to queue) are
difficult to answer for some respondents, since they seldom queue in the bank or they
always use online bank.

2) The meaning of Q 23(The follow-up that you received relating to your enquiry (if
received)) and Q 24 are similar, which could be merged.

3) Many respondents said their current commitment of certain bank just since employer
appointed the bank, other than out of affective or cost consideration.

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 4) Some respondents suggest adding the question relating to the deposit safety. In Taiwan,
they said, many people transfer their deposit to the state-owned banks due to the recent
financial crisis, which threatens the small banks; some suggest adding the question of the
bank location (for example, some just change their banks due to the certain bank near to
their new job location).

5) Some respondents have a commitment with certain bank, just since their relatives are
working in this bank. Of the two questions that Q34 (I established such interpersonal
relationships mainly due to my personal preference) and Q35 (I established such
interpersonal relationships mainly due to my emotional needs), they are not sure which
one is more suitable for such consideration about their relatives.

6) Some respondents said that they have commitment with two banks, rather than one, for
the reason of risk diversification. It seems that having commitment with more than one
bank, cannot be said customer loyalty.

3.6.2 Modification of questionnaires

For the response of 1), if the response never or seldom queues, they are suggested to choose
scale of 1 or 2 for both questions.

For 2), the interviewer will pay more attention to explain the difference of the two questions
between the follow-up service and the paperwork.

The reason of above was to minimize the changes as little as possible of the present research‘s
questionnaire when comparing to the original extended SERVQUAL since the main aim of this
research was to test the SERVQUAL scale and not the extended SERVQUAL instruments. All
respondents had fully understood the questions asked and especially the extended SERVQUAL
dimensions.

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For 3), the switching behavior following employer‘s decision cannot be a dependent question.
Considering people tend to accept the accounts their company appoints for the convenience of
getting pay. So it can be attributed to Q6 (relating to monetary cost).

For 4), since a great number of 100 respondents reflect these problems, they are thought to be
necessary to be added in the formal questionnaire. In fact, they become Q 28 and Q29 in the
constructs of ―attractiveness of alternatives‖.

For 5), although the suggestions are logical and would help many of the sample subjects of the
research, in order not to confuse the part of expectations with that of perceptions, finally it was
not adopted.

For 6), this study will allow respondents have commitment with two or more banks. Due to the
reason of risk diversification and various service needs, it is natural to have more than one
committed bank. We cannot exclude the interviewees with two or more committed banks.

Then the final questionnaires (see appendix A) are used for formal survey.

3.7 Composition of constructs

After the sound analysis from perspectives of theory and practical study, the composition of the
five constructs of this research model is presented as following:

Construct Meaning Variables Questions

Customer Extent of customer‘s Tangibles; Q 1-24

satisfaction perception to which core Reliability;
(service service given by bank staff Responsiveness;
quality) could meet his/her Assurance;

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 requirements, desires, goals, Empathy
and so forth (Oliver, 1999;
Jones et al., 2000).
Attractiveness Extent of attractiveness which Time factor; Q25-29
of alternatives consumer senses other viable Monetary factor;
competing in marketplace Psychology factors
(Jones, M. A.; Mothersbaugh,
D. L.; Beatty, S. E. ,2000)
Affective Extent of consumer‘s affective Discount dependence; Q30-33
commitment attachment to certain bank (or Customization
bank branch), with which s/he dependence;
wants to maintain relationship Personal preference;
(Allen & Meyer, 1990). Emotional correlation
Continuance Extent of consumer‘s Number of existing Q 34-35
commitment perceived cost associated with alternatives;
quitting relationship Personal sacrifice
(Allen & Meyer, 1990).
Customer Extent of consumer‘s re- Recommendation; Q36-37
loyalty transaction intention toward Intent of repurchase
specific bank (or bank branch)
(Oliver, 1999).

Table 3.1: Composition of constructs

Such composition of constructs is operated in the final edition of questionnaires.

3.8 Suggested Moderator Variables of the Relationship between Satisfaction and Loyalty

According to the review of the literature related to individual determinants of buying behavior,
five personal characteristics were supposed to have a moderating impact on the relation between
customer satisfaction and loyalty. Five demographic factors were selected, in order to determine

81
whether there were differences in their explanatory power. Each of these factors had been found
to be relevant in the context of customer satisfaction and loyalty in previous studies. A brief
discussion of each of the five possible moderators follows. (Homburg & Annette,2001) In this
study, the demographic and lifestyle variables utilized were:

Gender. Some research had interested in the impact of gender on buying behavior (e.g., Slama &
Tashhan, 1985; Zeithaml, 1985). Slama & Tashlian found that women's purchasing behavior
influenced by their assessment of personal interaction processes. Contrasted to men, women are
more involved in purchasing activities (Slama & Tashlian, 1985), and they would pay more
attention to the suggestions from sales representative (Gilbert & Warren, 1995). According to
these arguments, guide to the suggestion that gender might moderate the relationship between the
satisfaction and loyalty. For example, one might predict that the loyalty effect of satisfaction
with the sales process is stronger for women than for men, whereas the impact of product
satisfaction on loyalty might be stronger than men. (Homburg & Annette,2001) In this study,
gender was recorded as male or female. The data is analyzed in terms of a scale from 0 to 1.

Age. Age is another demographic characteristic that had attracted a great deal of research
attention. Research compared young and old customers to focus on different information-
processing abilities which needed to evaluate a product (Smith & Baltes, 1990; Walsh, 1982).
Most of these studies deduce that information processing declines with age (Gilly & Zeithaml,
1985). Older people have restricted information-processing capabilities; so their reactions to
satisfaction might also change. Therefore, age was suggested to be a moderator of the relation
between satisfaction and loyalty. In this study, age was reported in five categories from under 18,
to 55 and older, and not reported. The data is analyzed in terms of a scale from 0 to 4.

Education. Morris and Steers (1980) found that educational levels negatively relate to
commitment. Thus, we would put education levels into the survey to investigate what the relation
between different levers of education. Beside, within the context of the financial services
industry education level or professional qualifications are a legal requirement for all advisors. In
this study, education level was categorized into four groups from secondary or below to master
or higher, and the data is analyzed in terms of a scale from 0 to 3. (Homburg & Annette,2001)

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Job status. Different job and employment status, would determine the knowledge composition,
purchase behavior and psychological characters. Therefore, in this study, job status was reported
in 10 categories, and the data is analyzed in terms of a scale from 0 to 9.

Income. The income of a person is assumed to have a powerful influence on decision making
(Zeithaml, 1985). In a common sense, it is assumed that people with higher income had achieved
a higher level of education (Farley, 1964). Therefore, they often engage in information-
processing before the decision-making process (Schaninger & ScigHmpaglia, 1981), and their
choice is essentially based on the evaluation of the information given to them. They should feel
more comfortable in processing and relying on new information process due to their cognitive
skill (Hoyer, 1984; Spence & Brucks, 1997). Hence, income is suggested as another
demographic characteristic that might affect the linkage of satisfaction and loyalty. (Homburg &
Annette,2001) In this study, income is reported in 4 categories from less than $15,000, to
$45,000 or more, and not reported. The data was analyzed in terms of a scale from 0 to 3.

3.9 Sampling method

Positivist research needs wise disposals of sampling after thorough observations of research
objectives. Surveys are a common part of modern life. Bryman (1989) suggested that they need
to collect the data in a number of units and usually at a crucial moment of time, with a view to
collecting systematically a body of quantifiable data in respect of a number of variables that are
checked to observe patterns or behaviors of association.(Bryman, 1989)

Clearly it is not possible to survey the total population (as Ghauri & Prasad ,1995) and so
sampling provides the answer. Saunders, M., Lewis, P and Thornhill, A. (2007). explain that
sampling saves work by examining the sample instead of the whole population. In short a sample
is a portion of the population, selected so as to represent the whole population.

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The sampling method used in this research will be the non- probability (purposive) sampling.
According to Sekaran (2000) the key characteristic of non-probability sampling is that items
chosen for a sample are not chosen randomly but purposively. The popular form of purposive
sampling is quota sampling. The advantage of using a quota sampling method is that the costs
involved are moderately low, and it requires no lists of population. However the possibility of
introducing bias by the researcher would be the drawbacks of this method (Sekaran, 2000).

Quota sampling is entirely non- random and is normally used for interview surveys. It assumes
that the sample would represent the population, as the variety in your sample for various quota
variables is the same as that in the population. Therefore, quota sampling is a type of stratified
sample in which selection of cases within strata is entirely non- random (Barnett, 1991).

In this study, firstly the population is divided into five specific groups according to the locations,
the quota for each group is set based on the. Next, the number of cases is calculated for each
quota. After the data collecting, the full samples can be provided.

Quota sampling is often used for a large population. Decisions on sample size are governed by
the need for adequate responses in each quota, so that statistical analyses should be undertaken
(Saunders et al., 2007).

In order to find all the possible targets, the city of was selected and clustered for data collection.
The reason for the choice of central cities is that it has the highest level of commercial activities
including banks. Quota sampling was carried out by clusters of geographical area in the Taiwan,
for the administration of questionnaires.

Quota sampling has a number of advantages over the probabilities techniques. Especially, it can
be set up very quickly and to save the investigated cost. In addition, due to the unavailability of
sampling techniques in this study, quota sampling is used that does not require a sampling frame
(Saunders et al., 2007).

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3.10 Sample size

It is a known fact that the higher the sample size the more representative is the results (Ghauri &
Simon, 1999). However, in pertinence to this survey, it would be impossible to have a large
sample because of the constraints by time and recourses. As supported by Ghauri et al., that
there is no limit to the size of a sample that ultimately affects the validity of results from which
the sampling survey is threatened by non-response error. Therefore with regards to this notion of
sample size limitations, in the context of this study, it was decided that economically, 317 was
determined as the suitable sample size for the study:

N=(Z*SD) 2/ E2

In this study, confidence level Z is fixed at 95% level (1.96); the SD and mean are estimated at
21.5 and 1.95 respectively; the error factor allowance is made at 1% level.

Therefore the sample size is:

N=(1.96*1.95) 2/ (21.5*0.01) 2 =317

3.11 Data collection

According to Ghauri & Prasad (1995), population is defined as the collection of elements of
which the study wishes to make inferences. Therefore the population of interest for this study
will be the customers of Taiwan banks. However, Ghauri & Prasad advocates that due to the time
and expenses constraints, it is not feasible to make use of the entire population for the study;
consequently, sampling would be more appropriate in the selection of some elements in a
population where conclusions can be made of the entire population. Despite being less time
consuming, sampling has its own drawbacks and sampling error is one of the drawbacks.

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For the collection of data, the same questionnaire was given to all the interviewed people.
According to Saunders, M., Lewis, P & Thornhill, A. (2007). the administration of questionnaire
is the best way of obtaining customers‘ attitudes or perceptions in the present study, primary data.

A street-based questionnaire was conducted. Firstly by soliciting participation of banking service

users who come out of certain bank, around 700 people were interviewed. Secondly, by asking
the filtering question (whether you have established a commitment with certain bank/ bank
branch), 317 copies of questionnaires were filled in.

The survey started Date/ month/ year and was conducted between Time am and Time pm. The
survey questions took place at the outside the headquarter branches of major High Street banks
in cities such as:

In five different locations shown in table:

Location Quota Case

1 Taipei city (台北市) 31 99

2.Taipei County (台北縣) 25 81

3.Taoyuang County (桃園縣) 20 64

4.Taizhung city (台中市) 15 46

5.Kaohsiong city (高雄市) 9 27

Total 100 317

Table 3.2: Locations, quota and cases of the survey

The duration of each survey was about 5 minutes. The reason for the choice of the
aforementioned cities in Taiwan is that these locations had the highest level of commercial
activity. All the headquarter branches of the major consumer banks are located in these five
cities‘ population is highly diverse in terms of their demographics. 317 questionnaires were
distributed in all the five locations.

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3.12 Coding of demographics

1 Gender:

Male 0
Female 1

2 Age:

18-24 0
25-34 1
35-44 2
45-54 3
Over 55 4

3 Education:
Secondary or below 0 Diplomat/ College 1
Bachelor 2 Master or higher 3

4 Job statuses:

Student 0 Professional/ consultant 1

Academic 2 Retired 3
Technician/ Operator 4 Housewife 5
Clerical/Administrative 6 Unemployed 7
Manager/ Executive 8 Other 9

5 Annual Income: (Unit:USD)

Under 15,000 0 15,001 – 30,000 1

30,001 – 45,000 2 Over 45,001 3

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3.13 Primary manipulating of data

According to coding book, we created a data file and entered the data.

Through running the functions of Descriptive Statistics, we find two errors and correct them, the
finish the screening process of data.

In particular, for the scale of Q35 (There are few personal sacrifice of mine, if I switch the bank
to another), the wording of particular items has been reversed to help prevent bias. In other
words, the only two variables (CM1 and CM2 in SPSS file) for construct of continuance
commitment are negatively directed. Therefore, the original scale of Q35 should be re-scored.
The new variable RCM2 is created, retaining the original meaning of data unchanged. After the
negatively worded item has been reversed, the data file is adequate to be calculated for total
scores of each subject.

As the composition of constructs (table 3.1), through the function of Transform, the new five
variables (CS, ATTR, AM, CM, CL) are created and their numeric expressions and total scores
are established. Through running the Descriptive for the new scales, their values are appropriate
(there are two missing values for ‗service quality‘; however, due to the large population, the
missing values can be ignored).

3.14 Reliability and validity analysis

Using LISREL 8.52, the reliability, convergent validity and discriminative validity of this
questionnaire can be tested as following:

Compared with the suggested 0.7 thresholds, we examined the result of insignificant factor
loadings and low factor loadings. It can be seen that (see table 3) that the p-values are all less
than 0.01, suggesting the all remained factor loadings are all significant.

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In addition, based on the threshold suggested by Bagozzi, Yi, & Philhps (1991) that is 0.7 and
0.5 respectively for the values of reliability and mean of item variance, the result of each
construct is shown above its own threshold, suggesting the reliability and convergent validity are
acceptable. Therefore, the measurement model is proved to be adequate, as shown in Tables 3.3:

Construct Items Reliability Validity Pass

(Mean of item
variance)
23(excluding 0.964 0.788 Yes
Service quality Q1)

5 0.897 0.925 Yes

Attractiveness
of alternatives
4 0.904 0.925 Yes
Affective
commitment
2 0.703 1.395 Yes
Continuance
commitment
2 0.713 0.845 Yes
Customer
satisfaction
Table 3.3: reliability and validity test of full samples

Confirmatory factor analysis is considered to be superior to the traditional criteria, such as

coefficient alpha in the context of scale validation, because of the lower application of restrictive
assumptions (Bagozzi, Yi, & Philhps, 1991).

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Analyses were conducted separately for each dimension and the moderating factors, of five
constructs. The reliability of the factors which represent the shared variance among a set of
observed variables to measure a basic construct (Fornell & Larcker, 1981). In General, a
composite reliability at least 0.6 is considered desirable (Bagozzi & Yi, 1988). This requirement
is met for each construct. Similarly, the mean of tem variance for each scale is more than 0.5,
indicating a high validity of this survey.

3.15 Statistical test used

Following the scoring of the responses, the ‗through the origin‘ model of multiple regressions
was used. The collection of data-which is then, summarized using descriptive statistics.

When using multiple regressions we have to make a few assumptions:

1) The data points are uniformly scattered around a regression line
2) The data values are independent of each other
3) A linear relationship between both the independent and dependent variables exists.

ANOVA and Paired sample t-test were the two principle tests employed for the testing of the
hypotheses. The paired sample t-test was used to test the perceived and expected values of the
SERVQUAL dimensions because this is the most appropriate test. For the testing of the
hypotheses between banking service user‘s educational level and banking service quality it is
more appropriate to use ANOVA because this test serves to conduct and assess whether the
means on a dependent variable are significantly different among three or more groups. In the
context of this study, the educational level had more than three groups therefore ANOVA is the
best test to be used (Saunders, Lewis & Thornhill, 2007).

The statistics processing are composed of three parts:

1. Correlation and regression analysis techniques- used to test the nature and strength between
the independent and dependent variables.

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It is assumed that a linear relationship exists between the two sets; and that the independent
variables‘ values can assist in the prediction of the dependent variable.

Using the method of the ‗the least squares‘ we can obtain the following equation for the best line
in a scatter plot of independent and dependent variables.

Y= A +B*X +e

2. All the independent variable jointly against the dependent in each hypothesis will be regressed
to increase the accuracy of the estimate. Multiple regressions are then used to explain the degree
of variance in the dependent variable.

It also reflects the inter-correlation between the independent variables. The joint regressions of
the independent variables cause the individual correlation to become a multiple correlation or
multiplier.

The coefficient of determination, or the square of the multiplier, provides an indication of the
predictor‘s variance.

Multiple regressions also enable the formulation of the best fitting regression equation; generally
expressed as

Y=A+ B1*1+ B2*2+B3*39

Given the variables are held constant, for a particular variables its value will change when the
value of dependent variable either increases or decreases by B1 units for each unit increase of *1.

9
A= the constant, Y= the coefficient of the dependent variable, B=coefficient of the independent variable.

91
3. The probability of the test statistic t (p-value) for each independent variable indicates the level
of significance of the coefficient. If the significance level is set at 0.05, and find the p- value is
greater; we can say that particular independent variable does not contribute significantly in
explaining the variance of the dependent variable in the regression equation.

We can make inferences about the regression by comparing the p-value for the F ratio in the
analysis of the variance, with the significance level of 0.05. If the p-value is less than 0.05 then
the null hypothesis- that indicates that the independent variable is not related to the dependent
variable-is rejected.

Saunders et al. said it is common to choose a 95 percent confidence level, that is to say, an
interval such that there is a 95 percent chance that it will contain the population parameter. The
setting of the 5% significance level is in keeping with usual business research practice (Saunders
et al., 2007). Therefore, 5% is thought to be suitable for this study.

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 Chapter 4: Discussion, Results and Conclusions

Data collected from the completed questionnaires received from the 317 respondents, firstly are
delineated to show the scores for the multi-scale items for each of the independents and
dependent variables, and the means of the scores for these variables. It also shows the outline of
the profiles of the respondents, in terms of their age, gender, education level, job status, annual
income.

Using SPSS correlational analysis, the bivariate distribution of the mean scores for each pair of
the independent and dependent variables that are hypothesized to be correlated are analyzed,
through observation of the general shape formed by the pointes in the scatter diagrams that
reflect the magnitude and directions of the correlations (Grimm, 1993), and computation of their
responsive correlation coefficients(r). SPSS also computes of the statistical significance of the
resultant correlation coefficients, normally tested by the t distribution statistical model, at p<
0.01 level and p<0.05 level.

Following on from our methodology description, we now turn to the actual analysis of the
processed data. We begin with an explanation of our statistical analysis. From here we move
onto the testing of our hypotheses. In this chapter, the results of the questionnaires analysis will
be presented regarding the research‘s objectives, hypotheses and bank service users‘ comments.
Furthermore, tables and charts will be presented for a better and more comprehensive
presentation of the results with many of them found in the Appendix C. Finally, all the finding
presented in this chapter is based on the analysis of the 317 correctly filled questionnaires.

4.1 Variables analysis

Each participant received his or her questionnaires via street interview. A period of five days was
cost to conduct such interview and collect filled questionnaires. There have selected 317 as our
random sample. The questions for independent variables have fairly clear response options, as
validated by the pilot project feedbacks.

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To ensure questionnaire validity, each response was checked against a master list then analyzed
for consistency. The scores were coded, as previously detailed, (using The Management Scale as
the reference) and then transferred to a Microsoft Excel spreadsheet to facilitate computation.
Each worksheet was then consolidated with the data obtained from the ‗personal information‘
worksheet, and analyses using SPSS.

4.1.1 Descriptive statistics

Testing of hypothesis usually involves obtaining descriptive statistics include the mean, standard
deviation, range of scores, skewness and kurtosis. The statistical obtained for each of the
variables can be seen in table 4.1.

We can see that the mean values of service quality, affective commitment and customer loyalty
are all higher than the median, while mean values of attractiveness of alternatives and
continuance commitment are both lower than the median.

The constructs of attractiveness of alternatives, affective commitment and customer loyalty have
a negative skewed distribution, indicating a clustering of scores at the high end. Due to the large
samples in this survey, skewness will not make a significant influence in the analysis. From the
analysis for the skewness, the data of five constructs can be said normally distributed.

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

average service quality 315 2.39 6.04 4.2773 .66012

average attractiveness of
317 1.60 7.00 4.8688 .80940
alternatives

average affective commitment 317 1.00 7.00 4.3628 1.00104

average continuance
317 1.00 6.50 3.7066 1.03685
commitment

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average customer loyalty 317 1.00 7.00 4.4590 .80832

Valid N (listwise) 315

Table 4.1 Statistics of five constructs

4.1.2 Assessing Normality

The author will now use histogram and run the test of normality to assess the normality of the
distribution of the scores for the five constructs in this research: service quality, attractiveness of
alternatives, affective commitment, continuance commitment, and customer loyalty. These
graphs and tests were done separately through SPSS.

Histograms (see appendix B) display the frequency distribution of the scores on a single
continuous variable. The graphs illustrate that the scores of service quality are reasonably
distributed, as the shape of the distribution is approximately bell-shaped and most scores occur in
the center and taper out towards the extremes. This is also the case with the scores of both
commitments and with the scores of customer loyalty. However, the distribution of the scores for
attractiveness of the alternatives is negatively skewed to the right/left, which suggest a violation
of normal distribution (see appendix B)

The significance values shown in the Kolmogorov-Smirnov test of normality confirmed the
output of the histograms. ‗A non-significant result (Sig. Value of more than .05) indicates
normality‘ (Pallant, 2002, p. 58). The Sig. Value of 0.000 for the variables of attractiveness of
alternatives and continuance commitment shows suggests a violation of the assumption of
normal distribution.

Furthermore, the positive skewness values for service quality and affective commitment indicate
positive skews (scores clustered to the right at the low values), which correspond with the
illustrations of the histograms. In addition, the negative Kurtosis values denote that the
distribution is relatively flat (see appendix B) for descriptive statistics concerning this variable.
The descriptive statistics for the other two variables will be attached in the appendix of this
research. The author will not discuss them here, as they are quite straightforward to the readers.

95
 4.1.3 Correlation Test

Reminder: the aim of the seven hypotheses in this research is to identify whether the
commitment and trust between the service provider and customers lead to long-term
relationships between them from their counterparts‘ perspectives, in the banking setting in
Taiwan. Therefore, the author will run correlation tests to find out the following:

H1: There is a positive relationship between ‘service quality’ of banking service and
affective commitment of customer.

H2: There is a negative relationship between ‘attractiveness of alternatives’ of banking

service and continuance commitment of customer.

H3: There is a positive relationship between affective commitment of banking service and
customer loyalty.

H4: There is a positive relationship between continuance commitment of banking service

and customer loyalty.

H5: Affective commitment of banking service is positively associated with continuance

commitment.

H6: The influence of satisfaction on customer loyalty is mediated by affective commitment.

H7: The influence of attractiveness of alternatives on customer loyalty is mediated by

continuance commitment.

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Before performing a correlation analysis, In order to check the violation of the assumptions of
the linearity and homoscedaticity, the scatterplots are generated for the relationship among the
five constructs. i.e: This will enable the researcher to check for violation of linearity and
homoscedasticity.

The scatter plots provide an indication of whether the variables are related in a linear or
curvilinear fashion and also signify whether the dependent variables and independent variables
are positively or negatively related. Only linear relationships are suitable for correlation analysis.

From the scatterplots, we can see the data points do not spread all over the place and all suggest
high correlation. Especially for the scatter plot of the relationship between the affective,
continuance commitment and customer loyalty, all points are presented as a narrow cigar shape,
indicating quite strong correlation. Since the distribution of scores on those scatterplots is
roughly linear, the Pearson correlation could be calculated. The results are recoded in appendix B.

As shown in the scatter plots, there was no evidence of a curvilinear relationship or the undue
influence of outliers. It can be established that relationship between every two variables is
roughly linear. The upward trend suggests a positive correlation between two variables, which
means that the increase of commitment and trust among the sellers and the buyers leads to a
long-term relationship from their counterparts‘ perspective.

Obviously, all seven hypotheses test for correlation between the various dependent and
independent variables. There are quite a few ways of approaching this. However, a proper
measurement of each variables is needed and the simplest way to do this to employ the
dimensions, which have been identified in the literature review.

Correlation coefficients provide a numerical summery of the direction and the strength of the
linear relationship between two variables. Pearson correlation coefficients(r) can range from –1
to +1. The sign in front indicates whether there is a positive or negative correlation. A value of –
1 or +1 indicates that the value of one variable can be determined exactly by knowing the value

97
on the other variable. On the other hand, a correlation of 0 indicates no relationship between the
two variables.

Sig. (2-tailed) is the indicator of whether there is a statistically significant correlation between
two variables. If Sig. (2-tailed) is above the alpha value of 0.05, then the correlation is not
significant. Conversely, if the Sig. (2-tailed) value is less than 0.05, then the correlation is
statistically significant. Although the histograms and the test of normality show that only the
scores of commitment in sector 2 violates the assumption of normal distribution, the author will
still opt for non- parametric test-Spearman Rho to examine the association between the variables,
since the sampling method in this research is purposive sampling instead of random sampling.
The main advantage of such tests is that they have less stringent assumptions than their cousins-
the parametric tests. The main disadvantage is that they are regarded not being as ‗powerful‘ as
their cousins (Grimm, 1993).

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 Correlations

Service Attractiveness Affective Continuance Customer

Quality of alternatives commitment commitment loyalty

Service quality Pearson Correlation 1.000 .163** .478** .376** .625**

Sig. (1-tailed) .002 .000 .000 .000

N 315.000 315 315 315 315

Attractiveness of Pearson Correlation .163** 1.000 .093* -.176** .128*

alternatives Sig. (1-tailed) .002 .049 .001 .011

N 315 317.000 317 317 317

Affective commitment Pearson Correlation .478** .093* 1.000 .563** .522**

Sig. (1-tailed) .000 .049 .000 .000

N 315 317 317.000 317 317

Continuance commitment Pearson Correlation .376** -.176** .563** 1.000 .395**

Sig. (1-tailed) .000 .001 .000 .000

N 315 317 317 317.000 317

Customer loyalty Pearson Correlation .625** .128* .522** .395** 1.000

Sig. (1-tailed) .000 .011 .000 .000

N 315 317 317 317 317.000

**. Correlation is significant at the 0.01 level (1-tailed).

*. Correlation is significant at the 0.05 level (1-tailed).

Table4.2: Correlation analysis of the five constructs

Then the size of the value of the correlation coefficient was decided, for indicating the
relationship strength between your two variables. According to Cohen (1988)‘s standard, the
guidelines for assessing the relationship are showing in Table 4.3:
Strength Value
Small 0.10 to 0.29
Medium 0.30 to 0.49
Large 0.50 to 1.0
Table 4.3: the guidelines for assessing the relationship

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Except the relationship of attractiveness of alternatives and continuance commitment, the rest
values are positive. Here we can see that, 1) the in Taiwan banking industry, service quality play
the much more important role in building customer loyalty than switching barrier. Although the
alternatives could offer more attractive terms, the consumers in Taiwan do not tend to switch
their banks; 2) affective commitment is a better predictor than continuance commitment of
customer loyalty, as its higher correlation of 0.522 than 0.395.

We can deduce from the table 4.2 that: the service quality has the strongest relationship with the
formation of customer loyalty, more than the role of affective commitment; oppositely, the
attractiveness of alternatives has minor impact on the loyalty, less than the influence of
continuance commitment.

4.2 Hypothesis Testing

Reminder: The objective of the hypotheses testing is to identify whether one party‘s commitment
to the party or one party‘s trust on the other party leads to a long-term relation from the
perspective of the other party. But before testing these hypotheses, it is not the major concern of
this study; it is indeed plausible to clarify whether one party‘s commitment to the other party or
one party‘s trust in the other party enhances their own determination to stay in the business
relationship with their counterparts. In consequences, the author generated scatter plots, followed
by Spearman Rho correlation test to examine this issue.

Both the scatter plots and the correlation tests confirmed that as one party‘s commitment to the
other party or one party‘s business relationship with the other party increase proportionally.
These results are important, because when one party is willing to commit to, or to trust to the
other party, it does not necessarily follow that they indeed want a consistent and long-term
relationship.

However before considering each in turn, it is worth re-establishing our testing criteria. Firstly
we are applying a one-tail test at a 95% confidence level. The use of raw R2 value provides an

100
indicator as to the regression line ‗fit‘ of the variability of our commitment variable. Whilst the
ANOVA calculation provides p-values, which when examined in relation to our confidence level,
will indicate the extent of the relationships between both our dependent and independent
variables. When testing our hypothesis, the null is rejected when the p-value is less than 0.005.
Hence there indicated a certain level of significance in the relationship. Where the p-value is
found to be less than 0.05, we have failed to discover the existence of a significant relationship

At this stage, we need to use the multiple regression statistical methods to analyze the
relationship between variables. We were doing this by analyzing the variance obtained from the
multiple regression analysis. ANOVA or Analysis of variance, is a method of testing the null
hypothesis that several group means refer to the equality of population, by comparing the sample
variance estimated from the group means to that estimated within the groups. (Mauger, 2003)
Our results indicate that the p-value is less than 0.005, which implies that a significant
relationship exists between the selected variables.

4.2.1 Test of Hypotheses 1 and 2

Given the table 4.2 and figure 4.1 and 4.2, we can tell: There is a strong positive relationship
between ‗service quality‘ of banking service and ‗affective commitment‘ of customer (Pearson r
= .478); and there is a weak negative relationship between ‗attractiveness of alternatives‘ of
banking service and ―continuance commitment‖ of customer (Pearson r = -.176).

Compared with the contribution of service quality to the affective commitment, the attractiveness
of alternatives has much weaker relation with the continuance commitment. However, H1and H2
is accepted.

Customer‘s commitment, is measured by a straight forward question as to whether the banking

relationship has something the respondent committed to; plus two auxiliary questions, one is
concerning whether the relationship is something the respondent intends to maintain indefinitely,

101
and one other is concerning whether the relationship is worth the respondent‘s best efforts to
maintain. (Adamson, Chan, & Handford, 2003)

As discussed earlier in the literature review section, the establishment of a banking relationship
is an involved process for both the customer and the bank concerned.

There is a fact that a customer has an inclination to be committed to its banking relationship, as
the well being of his job or investment plan, in many respects requires the on-going support of its
bank. An individual‘s commitment to his relationship with a bank may also be explained, at least
in part, it takes some efforts when customer involves for the relationship to commerce, since
involved selection and negotiation processes almost constant before a individual‘s decision to
established a new account; in addition to the bank account, is established solely for the purpose
of facilitating the company‘s routine transactions (i.e. salary account) and no borrowings
requests are needed, in which case the decision process may be less involved since there will be a
lesser degree of dependence on the bank. (Adamson, et al., 2003)

On the other part of the bank, the establishment of a banking relationship with a customer is
normally preceded by researches and inquiries of the company‘s background and standing.
Where credit decisions are involved, being usually the case, prudent and in depth review and
analysis of the individual‘s financial standing, track record and future prospect will have to be
conducted to the satisfaction of the bank before a financial accommodation package appropriate
to the individual‘s needs can be agreed upon with the company. The credit evaluation process,
which is required to done on on-going basis (annually, semi-annually, quarterly or even monthly
depending each customer‘s special position), provides the bank in depth knowledge of the
customer‘s business or credit. Meeting the customer‘s needs is pivotal for a satisfactory
relationship; hence any financial package provided to a customer must be designed to meet the
demands of the customer‘s job/life plan. Finally, a bank must constantly keep abreast of the
customer‘s development and adjust its facilities in line with the customer‘s changing
requirements.

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The result was consistent with expectation. Individual customers in Taiwan appear to be well
aware of their banks‘ sound knowledge of their business and ability to apply such knowledge in
designing products or services offerings to meet their needs. Such positive comprehension
increased their commitment to their banking relationships. (Adamson, et al., 2003)

Figure 4.1 the scatter plot of the correlation between the average affective commitment of banking service and
average service quality

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Figure4.2 the scatter plot of the correlation between the average affective commitment of banking service and
average attractiveness of alternatives

For this study, bank‘s service quality is measured in terms of the bank‘s knowledge and insight
of the customer‘s business; whether it applies such knowledge/ insight in designing its products
and services for the customers; whether it is concerned with the customer‘s needs, interest, and
attitude; and whether it regards the customer as a source of long-term relationship instead of just
a user of its products/ services. (Adamson, et al., 2003)

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 4.2.2 Test of Hypotheses 3 and 4

Given the table 4.2, we can tell: There is a strong positive relationship between affective
commitment and the building of customer loyalty (Pearson r = .522); and there is a little weaker
but still positive relationship between continuance commitment and customer loyalty (Pearson r
= .395). In addition, from the scatter plot the three correlations among the three variables
(affective commitment, continuance commitment and customer loyalty) are quite close, which
influence each other in a significant way.

Figure 4.3 the scatter plot the three correlations among the three variables (affective commitment,
continuance commitment and customer loyalty)

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 ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 237.777 2 118.889 63.478 .000a

Residual 588.090 314 1.873

Total 825.868 316

a. Predictors: (Constant), continuance commitment, affective commitment

b. Dependent Variable: customer loyalty

Table 4.4 ANOVA for The roles of affective commitment and continuance commitment of building customer
loyalty

Here, Table 4.4, using the ANOVA, tt also shows a significant value of 63.478 for the F
distribution with 2 and 314 df. The f-test can be taken as a measure of overall significance of the
estimated regression, and also as a test of the significance of R2 in testing the null hypothesis.

Customer‘s commitment, on the other hand, is measured by a straight forward question as to

whether the banking relationship is something the respondent is very committed to; plus two
augmentative questions, one concerning whether the relationship is something the respondent
intends to maintain indefinitely, and one other concerning whether the relationship deserves the
respondent‘s maximum effort to maintain.

As discussed earlier in the literature review section, the establishment of a banking relationship
is an involved process for both the customer and the bank concerned.

On the part of the bank, the establishment of a banking relationship with a customer is normally
preceded by searches and inquiries of the company‘s background and standing. Where credit
decisions are involved, being usually the case, prudent and in depth review and analysis of the
company‘s business, organization, management, financial standing, track record and future
prospect will have to be conducted to the satisfaction of the bank before a financial
accommodation package appropriate to the company‘s needs can be agreed upon with the
company. The credit evaluation process, which is required to done on on-going basis (annually,

106
semi-annually, quarterly or even monthly depending each customer‘s peculiar position), provides
the bank in depth knowledge of the customer‘s business. Meeting the customer‘s needs is pivotal
for a satisfactory relationship, hence any financial package provided to a customer must be
designed to meet the demands of the customer‘ operations. Finally, a bank must constantly keep
abreast of the customer‘s development and adjust its facilities in line with the customer‘s
changing requirement.

The result is consistent with expectation. Retail banking in Taiwan appear to be well aware of
their bank‘s sound knowledge of their business and ability to apply such knowledge in designing
products/ services offerings to meet their needs. Such positive perception increases their
commitment to their banking relationships.

4.2.3 Test of Hypotheses 5

The correlation between the affective commitment of banking service and continuance
commitment is positive and strong with value of .563. In addition, from the scatter plot (figure
4.4), the points are scattered as shape of lines, indicating that there are strong and consistent
relationship between the two variables. It can be inferred that the affective commitment and
continuance commitment could boost the effect of each other‘s. Given that, bankers should
promote the relationship strategies for both kinds of commitments.

107
Figure 4.4 the scatter plot of the correlation between the affective commitment of banking service and continuance
commitment

4.2.4 Test of Hypotheses 6 and 7

With the values of .625 and .128 respectively, the relationships of service quality and
attractiveness of alternatives, with the customer loyalty are proved positive. However the gap
between the two values is significant, so we explore that result considering the role of
commitment.

Compared with the correlation value (0.522) of affective commitment and customer loyalty, the
correlation vale of service quality and customer loyalty has a higher position, that is, 0.625. It

108
seems that the affective commitment do not play a most mediating roles, that is to say, not all
loyal customers transferred from satisfied customers have the commitment with the bank. The
values of correlation are .522 also showing a significant relationship between affective
commitment and customer loyalty.

However, in terms of relationship of attractiveness of alternatives and customer loyalty, its value
(0.128) is much lower than the value (0.395) between continuance commitment and customer
loyalty. That means even the customers who are already find the alternatives and attracted by
some advantages of alternatives are still stay in the original relationship. That might be based on
one or several of the three reasons (time factor, monetary factor, psychology factors). Therefore,
the continuance commitment has a strong impact to build the loyalty for banks, and truly play the
mediating role in the transferring process from customer satisfaction to loyalty.

Deferent from most research results found in the eastern banking market, the individual
customers in Taiwan place the economic calculation at the centre of their decisions of switching.
That might base on the following reasons: 1) respondents have the relative conservative
consumption habit, they cannot easily trust the better terms that the alternative banks offer could
last long; then they would rather stay in the old relationship for safety and consistency of service
style; 2) People have to keep the relationship with certain banks not out of personal reasons. For
example, in Taiwan, most employers would choose the bank for their employees for the salary
payments, and most employees tend to accept such arrangement and choose the same banks for
their personal investment plan. It can be explained as the one kind of ‗inertia‘.

Though the affective commitment does not play most mediating role in this survey, but its
importance cannot be ignored. Just due to the low level of affective commitment among the
Taiwan customers, considering recent downtrend of banking industry of Taiwan as mentioned,
the affective commitment could be the potential drive for the development of customer loyalty.

109
Figure 4.5 the scatter plot the three correlations among the three variables (service quality,
attractiveness of alternatives, and customer loyalty)

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 4.2.5 Summery

Hypothesis B coefficients P- value Sig (at 5%) Reject

Hypothesis 1
.126 .000 0.050 Yes

Hypothesis 2
-.344 .002 0.050 Yes

Hypothesis 3
.177 .000 0.050 Yes

Hypothesis 4
.115 .011 0.050 Yes

Hypothesis 5
.292 .000 0.050 Yes

Hypothesis 6
.066 .000 0.050 Yes

Hypothesis 7
.016 .386 0.050 Yes

Table 4.5 Hypotheses Matrix

Hypothesis 1 (H1): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to .000. The beta coefficient
value of .126 indicates that there is a significant positive relationship between service quality and
affective commitment. Hence we can reject the null and accept the alternative- that there is a
significant positive relationship between service quality and affective commitment in Taiwan
banking industry.

Hypothesis 2 (H2): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is 0.002. The beta coefficient value of –
0.344 that indicates there is a significant negative relationship between attractiveness of

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alternative and continuance commitment. Hence we can reject the null and accept the alternative-
that there is a significant negative relationship between attractiveness of alternative and
continuance commitment in Taiwan banking industry.

Hypothesis 3 (H3): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to 0.000. The beta coefficient
value of 0.177 indicates that there is a significant positive relationship between service quality
and customer loyalty. Hence we can reject the null and accept the alternative- that there is a
significant positive relationship between service quality and customer loyalty in Taiwan banking
industry.

Hypothesis 4 (H4): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to 0.011. The beta coefficient
value of 0.115 indicates that there is a significant positive relationship between attractiveness of
alternatives and continuance commitment. Hence we can reject the null and accept the
alternative- that there is a significant positive relationship between attractiveness of alternatives
and continuance commitment in Taiwan banking industry.

Hypothesis 5 (H5): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to 0.000. The beta coefficient
value of 0.292 indicates that there is a significant positive relationship between affective
commitment and continuance commitment. Hence we can reject the null and accept the
alternative- that there is a significant positive relationship between affective commitment and
continuance commitment in Taiwan banking industry.

Hypothesis 6 (H6): from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to 0.000. The beta coefficient
value of 0.066 indicates that there is a significant positive relationship between service quality
and customer loyalty. Hence we can reject the null and accept the alternative- that there is a
significant positive relationship between service quality and customer loyalty in Taiwan banking
industry.

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Hypothesis 7 (H7) from our sample of 317 and keeping all other variables constant; with a 95%
level confidence the p- value of the observed t statistic is equal to 0.038, much higher than the
confidence value. The beta coefficient value of 0.016 indicates that there is a significant
relationship existing between attractiveness of alternatives and customer loyalty, and it points in
the same direction as our hypothesized value. Hence we can reject the null and accept the
alternative- that there is a significant positive relationship between alternatives and customer
loyalty in Taiwan banking industry.

Customer satisfaction

Attractiveness of alternatives Service quality

H2: .002 H1:.000

H5

Continuance H6
Positive Affective
commitment relationship: commitment
.000

H4: .011
H3: .000

H7: .000 H6: .038

Customer loyalty

Figure 4.6 research model with p-value

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The summary results, including path coefficients, are presented in Figure 4.6. All path
coefficients are significant at the 0.05 level and the directions are consistent with the predictions.
Hence, H1 through H7 are all supported.

4.3 Analysis for the moderating variables- Demographics

4.3.1 The distribution of variables of demographics

Tables from 4.6 to 4.8 recorded the sample data in relation to gender, age, education, job status,
and annual income respectively. From this we can see that the level of commitment within the
female group is lower than the male‘s. There could be a number of reasons for this; it could be
that they do feel discriminated against. Or there could be external factors not accounted for
within the research design at play.

Age Education Job status Annual income

N Valid 317 317 317 317

Missing 0 0 0 0

Mean 1.75 1.38 4.59 1.33

Std. Deviation .852 .887 3.160 .993

Skewness .409 -.335 .024 .103

Std. Error of Skewness .137 .137 .137 .137

Kurtosis -.595 -.953 -1.545 -1.071

Std. Error of Kurtosis .273 .273 .273 .273

Minimum 0 0 0 0

Maximum 4 3 9 3

Table 4.6 Statistics of Demographics

In terms of normality of these demographic data, from the skewness vale of them, it can be seen
that except education has a negative value, other variables all have positive ones. That could

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provide important evidence for explaining the impact of these variables on the mediating role of
commitment.

4.3.2 Gender Summery

Gender

Cumulative
Frequency Percent Valid Percent Percent

Valid Male 163 51.4 51.4 51.4

Female 154 48.6 48.6 100.0

Total 317 100.0 100.0

Table 4.7 frequency of gender

The weight between the Male and Female is 51.5:48.6, which is quite even. Both male and
female in Taiwan society have the participation right on the financial issues in Taiwan social life.

4.3.3 Age Summery

Age

Cumulative
Frequency Percent Valid Percent Percent

Valid 18-24 8 2.5 2.5 2.5

25-34 135 42.6 42.6 45.1

35-44 107 33.8 33.8 78.9

44-54 62 19.6 19.6 98.4

over 55 5 1.6 1.6 100.0

Total 317 100.0 100.0

Table 4.8 frequency of age

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As to the age, the ‗25-34‘ group covers the highest weight, that is, 42.6%; while the category of
‗over 55‘ become lowest. The second largest group is ‘35-44‘, which covers 33.8%. Given that,
we can see the most customers of banks in Taiwan are mainly the young and middle-aged ones
from 25-44 years old.

4.3.4 Education level summery

Education

Cumulative
Frequency Percent Valid Percent Percent

Valid Secondary or below 69 21.8 21.8 21.8

Diplomat/ College 76 24.0 24.0 45.7

Bachelor 154 48.6 48.6 94.3

Master or higher 18 5.7 5.7 100.0

Total 317 100.0 100.0

Table 4.9 frequency of education

The survey of this research is conducted on the high streets in Taiwan central cities, where great
amount of high-level office buildings exist. Most of the interviewees are the white-collar workers
or managers from the financial industry, property industry, and IT industries. Therefore, the
percentage of interview with education degree higher than bachelor is 54.3, higher than the
average level.

4.3.5 Job status summery

Job status

Cumulative
Frequency Percent Valid Percent Percent

Valid Student 2 .6 .6 .6

Professional/ consultant 119 37.5 37.5 38.2

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 Academic 3 .9 .9 39.1

Retired 1 .3 .3 39.4

Technician/ Operator 18 5.7 5.7 45.1

Housewife 9 2.8 2.8 47.9

Clerical/Administrative 70 22.1 22.1 70.0

Unemployed 31 9.8 9.8 79.8

Manager/ Executive 2 .6 .6 80.4

Other 62 19.6 19.6 100.0

Table 4.10 frequency of Job status

As mentioned, due to the location selection of this survey, most interviewees are
professional/consultants and technician/ operators, which cover 37.5% and 22.1% respectively.

Subsection 4.3.6 Annual income summery

Annual income(USD)

Cumulative
Frequency Percent Valid Percent Percent

Valid Under 15,000 80 25.2 25.2 25.2

15,001 – 30,000 94 29.7 29.7 54.9

30,001 – 45,000 102 32.2 32.2 87.1

Over 45,001 41 12.9 12.9 100.0

Total 317 100.0 100.0

Table 4.11 frequency of annual income

Due to the job status, the interview paid ‗30,001 – 40,000‘ has the largest percentage, which is
32.2%. However, over 50% of interviewees are paid less than USD 30,000 per year.

In conclusion, the interviewees involved in this research mainly belong to the middle-class of
Taiwan society. They have surplus capital to make savings /investments and enough knowledge

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to support their financial decisions; more importantly, they tend to have various banking service
needs and frequent contact experience with banks, which could be a term to nurture the
commitment. Therefore, the sampling is believed to generate reliable data.

4.4 Exploration of commitment’s role between groups

Aiming to understand the role of commitment transferring customer satisfaction into customer
loyalty in more detail in Taiwan context, this section explore the development process of
affective commitment and continuance commitment respectively. By one/two- way between
groups ANOVA, the affective commitment is set as dependent variable and demographics are set
as factor variables. In this section, the development of affective commitment will be explored,
according to the factors of age/gender, education, job status and annual income. The findings
could also help mangers or bankers improve their relationship strategies, build commitment and
increase customer loyalty.

4.4.1 Age/gender factors

With very low F value of 0.02, the gender factor shows a weak relationship with the formation of
affective commitment overall. Compared with age, the relative higher F value (1.165) is showed,
due to different mental status and material status, age can be a significant factor impacting on the
development of commitment. Integrating the two factors, we examine the impact on the
development of affective commitment.

Dependent Variable:affective commitment

Type III Sum of Partial Eta

Source Squares df Mean Square F Sig. Squared

Corrected Model 206.637a 9 22.960 1.450 .166 .041

Intercept 15670.693 1 15670.693 989.927 .000 .763

gender .028 1 .028 .002 .967 .000

age 73.774 4 18.444 1.165 .326 .015

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gender * age 49.629 4 12.407 .784 .536 .010

Error 4859.855 307 15.830

Total 101606.000 317

Corrected Total 5066.492 316

a. R Squared = .041 (Adjusted R Squared = .013)

Table 4.12 Tests of Between-Subjects Effects

Figure 4.7 the relationship between age/ gender and affective commitment

Further, from Figure 4.7 we can see obvious distinction for male and female in different ages:

1) For the interviewees between 18 to 25 years old, their affective attachments for banks reach
the peak at 18 and then decrease rapidly; then there are little difference between male and female.
That makes sense since in Taiwan most of people with age 18 to 25 just graduated from

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 university or college, unmarried. They are interested in various emerging products or service,
and resistible for risks. In addition, due to the beginning of career life, their committed banks are
easy to be changed by the relative frequent job changes.

2) Seeing the phase of 25-34, the affective commitment both increase. Male‘s affective
commitment has much higher growth than female. With the more stable even prime time of
career, people gradually settle down, married and know their financial demands better. In order
to manage their financial plan well, they tend to choose a certain bank and accept its consistent
service. Such decision is often based on the satisfactory experiences for certain bank. Their
affective commitment gets peak value in this period.

3) At the stage of 35-44, female‘s commitment keep the same level and growth with their 25-34
period; on the other hand, for male, their affective commitment decrease but still higher than
female. The reason might be the downtrend of male‘s career and stable family support behind
females.

4) Over 55, the female‘s affective commitment is sharply increased while male‘ keep decrease
and finally fall below the level of female.

4.4.2 Education factors

Table 4.13 gives both between- groups and within groups sums of squares and degrees of
freedom. If the Sig. Value is less than or equal to 0.05, there is a significant difference
somewhere among the mean scores on the dependent variable. In this case, both values for
affective and continuance commitment are more than 0.05, indicating the minor variance with
the variable of education level.

Sum of Squares df Mean Square F Sig.

Continuance commitment Between Groups 16.477 3 5.492 1.281 .281

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 Within Groups 1342.387 313 4.289

Total 1358.864 316

Affective commitment Between Groups 138.304 3 46.101 2.928 .034

Within Groups 4928.188 313 15.745

Total 5066.492 316

Table 4.13 ANOVA between- groups and within groups sums of squares

Descriptives

95% Confidence Interval

for Mean
Std.
Deviatio Std. Lower Upper Minimu Maximu
N Mean n Error Bound Bound m m

Continuanc Secondary or
69 7.3623 1.38236 .16642 7.0302 7.6944 2.00 10.00
e below
commitmen
Diplomat/
t 76 7.7237 1.84462 .21159 7.3022 8.1452 3.00 12.00
College

Bachelor 154 7.3636 2.37860 .19167 6.9850 7.7423 2.00 13.00

Master or higher 18 6.7222 2.32140 .54716 5.5678 7.8766 2.00 11.00

Total 317 7.4132 2.07369 .11647 7.1841 7.6424 2.00 13.00

Affective Secondary or
69 16.4203 3.23313 .38922 15.6436 17.1970 5.00 24.00
commitmen below
t Diplomat/
76 17.8553 3.52024 .40380 17.0509 18.6597 10.00 27.00
College

Bachelor 154 17.8571 4.32870 .34882 17.1680 18.5463 4.00 28.00

Master or higher 18 16.2222 4.97707 1.17311 13.7472 18.6973 5.00 23.00

Total 317 17.4511 4.00415 .22490 17.0086 17.8936 4.00 28.00

Table 4.13 descriptive on continuance commitment and affective commitment

Horizontally compared, with college or bachelor education level, interview has the highest
commitment; the lowest commitment is kept by the ones with master degree or higher.
Obviously, for two kinds of commitment, the tripod shape is showed in Figure4.8 and 4.9,
especially the one for continuance commitment. The polarization of education level presents its

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reflection on the commitment level: the ill-informed customers switch banks might due to the
lack of information (they are easy to follow trend) or changing career; the knowledgeable
customers are likely to switch for reasons of new needs and wants
Vertically compared, From Figure 4.8 and 4.9, we can see interviewees with degree below
college have higher level of affective commitment than continuance commitment. A bachelor of
them has lower position in affective commitment than continuance commitment.

Figure 4. 8: the relationship between education level and continuance commitment

Figure 4.9 the relationship between education level and affective commitment

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 4.4.3 Job status factors

According to table 4.14, we can see there is a closer relationship of affective commitment with
affective commitment than continuance commitment. In addition, Manager/ Executive achieve
the highest continuance and affective commitment.

ANOVA

Sum of Squares df Mean Square F Sig.

continuance commitment Between Groups 66.665 9 7.407 1.760 .075

Within Groups 1292.199 307 4.209

Total 1358.864 316

affective commitment Between Groups 349.169 9 38.797 2.525 .008

Within Groups 4717.323 307 15.366

Total 5066.492 316

Table 4.14 ANOVA analysis continuance commitment and affective commitment

4.4.4 Annual income factors

From table 4.10 and 4.11, we can see that the interview with annual income of 30,001-40,000
has highest continuance commitment. Impressively, in terms of affective commitment, the value
keep increase and the highest value is kept by the ones with over 40,001 annual income. Given
that,

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Figure 4.10 the relationship between annual income and continuance commitment

Figure 4.11 the relationship between annual income and affective commitment

4.5 Conclusion

A growing consensus is found that there has been a shift in marketing strategies of banking
industry: bankers tend to pay attention to the lasting relationships with existing customers and

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the long-term value, instead of generating and maximizing new transactions with new customers.
Therefore, there is a need to rethink the traditional marketing theory and practical strategies.

This research focuses on the factors that determine success in relationship marketing in the retail
banking market in Taiwan; as an understanding of what these success factors are, why and how
they operate will be crucial to the banks for the implementation of an effective relationship
marketing strategy, on which their continued prosperity in this market will depend.

Through the review of some prominent research works in the field of commitment we have
analysed the three-dimensional framework that allows for a distinction between dimensions of
commitment: ‗continuance commitment‘, ‗affective commitment‘ and ‗normative commitment‘.

The aim of this work has been to look for new theoretical contributions that may clarify the true
role of commitment, and the definition of its ‗affective‘ and ‗continuance‘ dimensions. Our main
argument is that a theoretically solid explanation for the dimensional conception of commitment
is still necessary, and commitment indeed plays a mediating role between customer satisfaction
and customer loyalty. Moreover this paper could help commitment solve problems of
transferring customer satisfaction into customer loyalty, through relationship marketing
strategies that enhance the commitment.

First, after a review of the nature of the phenomenon, its antecedents, purposes and consequences,
our attention was caught by the poorly defined concept of commitment. Is it an attitudinal or a
behavioral concept? Is it a ‗psychological state‘ or an act of the will? Is it a consequence of an
emotional or a rational decision?

Among previous studies relating to relationship marketing, the findings of Morgan and Hunt
have established that successful relationship marketing requires relationship commitment, and
their main argument is that relationship commitment could increase the ‗cooperation‘,
‗acquiescence‘ and ‘ propensity to leave‘, which could make benefit for the long-term benefit of
a corporation.

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If we look at the description of ‗continuance‘, ‗affective‘ and ‗normative‘ commitment
dimensions, some questions arise about the reliability and validity of this three-dimensional
model. Here, our main concern focused on the relationship of the two kinds of commitment. In
fact when reviewing the literature, high statistical correlations and lack of discriminating validity
have been found between ‗affective‘ and ‗normative‘ commitments. That means that it is not
clear yet how the two dimensions are conceptually separable, and also, that a considerable
conceptual redundancy exists.

We defend that these problems have to do with the way in which ‗affective‘ and ‗normative‘
commitment are defined. In the empirical study, we found that the continuous study play a more
significant mediating role for the transfer from customer satisfaction and loyalty.

Then, the definition of ‗moral organizational commitment‘ could be extended from a normative
perspective to a wider approach that would consider moral ‗norms‘, along with moral ‗goods‘
and ‗virtues‘ as well. There are more potential for affective commitment to be developed in
Taiwan‘s banking service. Since as many researchers argued, affective commitment, as the
desires and impulses to keep certain relationship would make more effective retention of
customers.

Here, service quality and attractiveness of alternative simultaneously affect loyalty in different
ways: service quality could make contribution to build affective commitment, while the other
retains customers based on the economic calculation. Many research emphasized the importance
of affective commitment. As shown in Table 4.2, the total effect of attractiveness of alternatives
(.128) on customer loyalty is much lower than service quality (.625).

Therefore, the mediating role of commitment in the process of transferring customer satisfaction
into loyalty is explained. The positive correlation values of commitment with other variables
disclose that customer loyalty is primarily affected by commitment. In particular, the most
interesting point of this result is the partial mediating role of continuance commitment between

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attractiveness of alternatives and customer loyalty, The total effect of continuance commitment
(.522) for customer loyalty is higher than continuance commitment (.395).

Such result indicates that, in Taiwan market, only when customers are committed to the banker
both psychologically and economically customers‘ loyalty can be established. Given that,
bankers face the challenge of applying the effective strategies to meet customer‘s desire and
offer more attractive service than competitors. This result deepens the understanding of forming
process of customer loyalty in Taiwan banking industry, especially for retail banks.

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 Chapter 5: Recommendations for Future Work

5.1 Practical Implication

5.1.1 Managerial Implications

This research was undertaken with a view to providing insights and understanding of relationship
marketing in the international business to customer context. The author aimed to discover how
sellers and buyers in the banking industry could develop and maintain the committed relationship.

The results of this study clearly show that commitment is two important variables that mediate
the relationship between customer satisfaction and bank guest loyalty. However, the way the two
mediating variables work, however, requires some explanation.

Banks should seek customer commitment in order to get loyal customers. In doing so, however,
they should take into account that customer satisfactions are required mainly because both bear
on commitment. Thus, if bank managers want to build loyalty among their guests, they should
not only work on satisfying them, but also on establishing long-lasting relationships with their
customers by developing enough trust with them. In turn, satisfied and trusting customers will
commit to the bank, and committed customers will become loyal customers. This could be done
by strengthening guests‘ perceptions and attitudes toward the brand or/and the bank.

In this section, we propose some suggestions for bankers of Taiwan, in order to help them
rethink the relationship strategies. These are mainly based on the comparative importance and
priority of the two distinct -commitments service quality and switching barriers. Here we provide
five suggestions accordingly.

1) To do so, banks might invest resources in improving information channels so customers

could have access to more information regarding the bank and its services. Banks could

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 also keep in contact with their former guests trying to determine their current needs and
offering them services that meet those needs.

2) Banks could, as well, ensure that customers get a personalized service for a wide range of
services. This issue is very relevant due to the difference in needs between business
customers and leisure customers. This calls for specific marketing programs to develop or
strengthen long-lasting relationship with customers from these two market segments, an
in particular with the business market that represents the largest segment in banks under
study. These customers are requiring specific services from banks, such as Internet access,
conference room, among others. Through the increasing sophisticated personnel
restructuring in retail banking, it can be seen that fewer personnel available to interact
with customers. In particular, the conflicts faced by the personnel in banks become more
obvious- they often act as marketers and finance experts at the same time. As a
consequence, the training is demanded for bank staffing is more critical, including the
technical ability, sales skills. In particular, it is necessary for bankers to be trained for
understanding customer‘s preferred interaction style, consumption habit and
psychological needs, in order to adjust or promote customer relationship during the
contacts.

3) Bankers could promote customer retention strategies, by offering higher levels of service
quality, or establishing higher switching barriers, including the lock-in projects, relational
specific investments, service customization, etc. For example, to order to improve guests‘
perceptions regarding the bank is enhancing customer loyalty programs, which are now
based on reward cards (Palmer et al. 2000), by adding incentives that motivate customers
to acquire or add new and positive attitudes towards the bank.

4) Deeper customer analysis driven by technology could help. For example, though using
the databases of customer and quick statistics calculation on the information of their
profitability, satisfaction, and longevity, bankers might profit considerably. They could
provide appropriate amounts of assertiveness and affiliation, in order to improve the
interpersonal interactions with most valuable customers.

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 5) The firm or organizational environment within which employers and employees interact
also influences the customer-firm interaction within the framework.

This trust environment should systematically affect a customer's propensity to enter a trust
relationship with a brand or firm, where customer trust is defined as a high level of loyalty given
satisfaction. We propose that the primary effects of the trust environment on the satisfaction-
loyalty are two folds: (1) within a higher trust environment, the inflection point at which
customers start drastically reducing their consideration set of alternative brands (as they move
from problem solving to routinized behavior) should occur at a lower level of satisfaction; and (2)
within a higher trust environment, customers should move more rapidly from problem solving to
routinized behavior. The latter prediction should be reflected by an increased impact of
satisfaction on loyalty past the inflection point. Thus the trust environment should affect both the
timing of the first inflection point and the slope that is created as a result of the first inflection
point.

In the course of our discussion, several propositions emerged.

Regarding the firm-level trust environment, a high trust relationship between employers and
employees should increase the average level of quality and subsequent satisfaction. It should also
lower the proposed inflection point and increase the slope after the inflection point through its
signal value.

With the frequent use of ATMs, telephone/ Internet banking, the originally personal contact
between banking staff and customers become seldom. Lower transaction fees, unrestricted
business hours and locations based on the technology, make customers out of the bank branch
and decrease in banker -customer interaction. However, the missed interpersonal interactions
could be the potential chance to build affective commitment. The challenge for bankers will be to
represent the greater points of interaction to the customer without compromising the convenience

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factors which customers had expected. The banking staff should try to deliver added value to
customers though the individual interaction and treat it as the chance to improve their banking
service.

Nonhuman interactions could be another way to improve affective commitment. While people
encounter some specific or non-routine cases they tend to find a banking staff to assist in more
complex banking needs, whereas the routine cases are likely to de made with the technology-
driven networks with low cost. Generally, you cannot force people come back to branch for the
routine cases, so how to add the personal colors into the nonhuman interactions, will be the great
points for improving affective commitment. This can be a critical area for using banking
resources efficient and future development of commitment. For example, in UK Barclays Bank
has promoted a strategy likewise:
‗They are integrating multiple databases into a single PC accessible database to allow bankers
to target customers through several bank distribution channels and communications methods
and offer them banking services based on their financial and behavioral needs and
commitment ‘(Menon & O'Connor, 2007, p.168).

However, banks should keep their strategies of improving affective commitment consistent with
the bank along with behavioral commitment. Through transforming the data into information/
knowledge and then sales opportunities, increased affective commitment would make benefit for
commitment affective eventually. Any strategy the banker performs, aims to make contribution
for the increase of customer‘s commitment to the bank, since only sufficient commitment could
build real customer loyalty. With this paper we look forward to the deeper theoretical
understanding of banking relationship strategies.

5.1.2 Recommendation for enhancing affective commitment

According to the research results above, bankers should to apply more resources to improve the
level of service quality and affective commitment. Compared with attractiveness of alternatives,

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attractiveness of alternatives is still in the center of customer‘s consideration. Instead of
sensitivity to the service quality, in Taiwan market, customers more care about the personal
reward and sacrifice they could get through switching their banks. In addition, the customer
might probably views long-term emotional associations as a kind of psychological cost related to
maintaining the relationship. Thus, banks could engage in to find the most effective way to
improve the service quality based on customer‘s satisfaction, and then increase the customer‘s
loyalty.(Huang, 2007)

The trust environment framework in Figure 2 places the relationship between a customer and a
firm within a larger context that includes the firm's own environment, the market environment
within which the customer and firm operate, and the 1 irger political, economic, social, and
technological environment within which the market operates. The trust environment also
acknowledges the importance of the firm's internal relationships.

There are a multitude of factors that likely influent a consumer's willingness to enter a trust
relationship. We organize these factors into a trust environment within which customers
purchase and consume products and services. The trust environment includes three levels: (1) the
interaction between customer and firm; (2) the market environment within which the customer
and firm interact; (3) the political, economic, social, and technological environment within which
the market operates.

Finally, the degree to which customers empathize with employees or suppliers likely moderates
the impact of firm-level trust on customers. Research on firm or organizational trust identifies
two other important trust factors. Both identification-based trust as well as predisposition based
trust should exhibit the proposed effects on the customer satisfaction-loyalty relationship.

The market-level trust environment is largely a function of the degree of competition and
switching barriers that exist in a market. Primarily, these factors should influence the level of
customer satisfaction ii a market (through the accessibility of differentiated products and
services). These factors should also result in a fundamental change in the nature of the
satisfaction-loyalty relationship.

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When competition is weak and/or switching barriers are strong, significant dissatisfaction is
required to decrease a loyalty that is forced as "hostages" are created.

Finally, political, economic, and social aspects of the trust environment should affect customer
trust. Political institutions such as the FTC that provide information remedies make it easier for
customers to move up the satisfaction continuum and enter reutilized response behavior. They
also create an atmosphere of trust that should change the satisfaction-loyalty relationship as
proposed (lower the inflection point, and increase the impact or slope past the inflection point).
Similar effects should occur depending on general economic conditions and the society or
culture within which buyers and sellers interact. In good economic times, customers should be
less willing to trade off time and problem solving effort for money and thus enter a trust
relationship at a given level of satisfaction. Similarly, within a high trust culture or society,
customers should be more willing to enter a trust relationship at a given level of satisfaction.

5.1.3 Recommendations of Morgan and Hunt’s theory

In conducting their study, Morgan and Hunt (1994) identified five major precursors of
relationship commitment. Viz: relationship termination costs and relationship benefits, share
values, communication and opportunistic behavior, and positively tested the relationships
between these precursors on relationship commitment in the predicted directions.

Extending and applying Morgan and Hunt‘s concept and findings to this current study on
relationship marketing in the retail banking market in Taiwan, a model (as per) is advanced to
test the influences of precursors, identified through a review of the literature and in the context of
retail banking in Taiwan, on relationship commitment in Taiwan ‗s retail banking relationships.

These six precursors are:

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 1) Bank‘s customer-centered marketing strategy, which is most crucial as relationship
marketing must focus on the customer, being regarded as an asset; so that knowledge of
the customer can be applied in the designing of service offering; so that customer can be
integrated into the bank; and so that new value can be created with the customer.

2) Bank‘s long-term orientation- an important factor to the customer seeking a long-term

relationship, since it would be inappropriate to endeavor to establish a long-term
relationship with a bank that has a short time orientation.

3) Bank‘s negative reputation –Customers are sensitive to a bank‘s behavior and action
against its customers when difficulties are encountered. Ruthlessness on the part of the
bank is expected to be perceived negatively and impact adversely on the customer‘s trust
of the bank.

4) Communication-Due to high turnover of relationship managers from the banks,

customers desire concurrent and alternative communication channels with their banks in
the absence of the relationship managers primarily responsible for handling their
accounts.

5) Relational norms-featuring flexibility, information exchange and solidarity; relational

norms are shared values of exchange partners about what constitutes appropriate behavior
within their relationship.

6) Relationship Benefits-moral obligation of the bank to provide support to the customer in

time of difficulty; reduced transaction costs; reduced uncertainty; expert advice and high
quality service.

5.2 Limitation

As is the case of all other studies, this study is not without its limitations:

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Inability error, on the respondent‘s part, may very well exist. Inability error is a result of
respondents‘ inability to fill out the entire question accurately, due to certain reasons, such as
unfamiliarity (Malhotra& Birks, 2003).

Seeing as that the population represented only those who shop in stores in Beirut, it is possible
that the results of this study are not typical of results in general.

76% of the respondents were between the ages of 25-44, meaning that the results are mostly
representative of this age group, and not the entire population as a whole. If research is to be
conducted in the future, more effort should probably be put into representing all age groups.

The fact that only retail banking category was studied another limitation of this research. Future
research should be aimed at studying other banking sectors, as it is possible that commitment‘s
role may be only strongly correlated to the customer loyalty, in the case of retail banking.

5.3 Further research

Looking back to the literature review, Muncy‘s (1990) claim that less emphasis should be placed
on definitions and measurements of involvement, and that researchers should instead move to
analyzing the relationships that can be found between different levels of involvement and other
marketing concepts of interest, such as brand commitment, as is the case in this study, is most
certainly true.

Since the traditional theories mentioned by Vaughn (1980) provide insights into habitual buying
behavior, as well as the psychological and social motives underlying consumer buying decisions,
further research should not overlook them on the basis of being outdated. In fact, further research
should be applied to studying them at an even deeper level.

135
Habitual and variety-seeking buying, which can be seen as two contrasting forms of low-
involvement buying behavior, need to be analyzed more thoroughly, seeing as that their
relevance in the study of commitment and loyalty is substantial enough to require such an
analysis, and a better understanding of their determinants would in marketing success.

Further studies, testing the relationship between the customer satisfaction, commitment and
customer loyalty, should be conducted at a deeper level. This is especially true in the case of
testing for a relationship between hedonic value and brand commitment, as the discrepancy
between the theory and the test was great. However, this recommendation does apply to all of the
facets, judging by the fact that all of them were discovered to strongly correlate with brand
commitment.

It has been established that it would beneficial more marketers to target highly involved
consumers. This means that concepts that attempt to explain personal beliefs, such as
materialism, which was explained by Graham (1999).

Nevertheless, this work may have some recommendation for further research. First, new
measures are needed that adequately represent a more accurate conceptualization of the affective
dimension of commitment (affective tendencies) and also a wider conceptualization of the moral
dimension of commitment (moral judgments and virtues). Scales should be reviewed to
introduce better distinctions and to include moral goods and moral virtues (i.e., contribution to
the common good, service attitude, humility, industriousness, etc.).

Second, statistical analysis should be carried out in order to check if the correlation and lack of
discriminating validity between affective and moral commitment is overcome; and also, if moral
commitment gains independence and explanatory power.

Third, in order to make a proper distinction between commitment dimensions (continuance,

affective and moral) and its consequences (actions), it would be advisable to empirically observe

136
if the presence of different commitment dimensions explain different behavioral outcomes as
Meyer and Allen (1997) predict.

Future studies should examine how non-human factors such as data errors and technology impact
the generation of affective commitment. When affective commitment was being generated
during inter-personal contacts, an immediate, current challenge for most banks, not only in
Taiwan but also in the global banks around the world will increase these issues of interactions.
(Menon & O‘Connor, 2007)

137
 Appendix A: Questionnaire

Questionnaire

This survey is designed to understand the role of commitment in the relationship of customer satisfaction and customer loyalty.

Please tick the appropriate answers. Ticking (1) means that you are extremely dissatisfied or dissenting while ticking (7) means that
you are extremely satisfied or assentient.

Only summery measures and conclusions from the survey will be reported; your answers will be treated in the strictest
confidence and seen only by the principal researcher.

Your participation is greatly appreciated.

Section 1:

1 Gender: Male Female

2 Age: 18-24 25-34 35-44 45-54 over 55

3 Education:

Secondary or below Diplomat/ College

Bachelor Master or higher

4 Job status:

138
Student Professional/ consultant

Academic Retired

Technician/ Operator Housewife

Clerical/Administrative Unemployed

Manager/ Executive Other (please specify)______________________

5 Annual Income: USD

Under 15,000  15,001 – 30,000

30,001 – 45,000 Over 45,001

* Please consider one bank branch you visit most frequently, and answer questions of section 2-6, in the context of the bank branch
you think you have visited most frequently

139
Section 2: Service quality (customer satisfaction)

A Very Fairly Fairly Very Extremely

Extremely Neutral
dissatisfied dissatisfied satisfied satisfied satisfied
dissatisfied

1
How satisfied are you overall with the branch you visit
1 2 3 4 5 6 7
most often?
B How satisfied are you that the branch staff: Very Fairly Fairly Very Extremely
Extremely Neutral
dissatisfied dissatisfied satisfied satisfied satisfied
dissatisfied

2 Treat you as an individual 1 2 3 4 5 6 7

3 Understand your financial needs 1 2 3 4 5 6 7

4 Are friendly and helpful 1 2 3 4 5 6 7

5 Are knowledgeable about their products and services 1 2 3 4 5 6 7

6 Give quality advice 1 2 3 4 5 6 7

7 Give you 100% of their attention 1 2 3 4 5 6 7

8 Efficiently process your requests and enquires 1 2 3 4 5 6 7

9 Rectify any mistake on your account 1 2 3 4 5 6 7

10 Are mindful of your need for privacy 1 2 3 4 5 6 7

140
C How satisfied are you with Very Fairly Fairly Very Extremely
Extremely Neutral
dissatisfied dissatisfied satisfied satisfied satisfied
dissatisfied

11
How clean and tidy the branch is kept 1 2 3 4 5 6 7

12
How often you have to queue
1 2 3 4 5 6 7

13
The length of time you have to queue 1 2 3 4 5 6 7

14
The effort the branch staff make to reduce queues 1 2 3 4 5 6 7

15
Branch staff thanking you or apologising when you
1 2 3 4 5 6 7
have to queue
16
Ease of entry into the branch 1 2 3 4 5 6 7

D How satisfied are you with the way your complaints Very Fairly Fairly Very Extremely
Extremely Neutral
and enquiries are passed between staff: dissatisfied
dissatisfied dissatisfied satisfied satisfied satisfied

17
The way the complaint was acknowledged 1 2 3 4 5 6 7

18 Someone taking responsibility for sorting out your

complaint 1 2 3 4 5 6 7

19
The time taken to sort out your complaint 1 2 3 4 5 6 7

20
The resolution of the complaint 1 2 3 4 5 6 7

21
The way staff dealt with your enquiry 1 2 3 4 5 6 7

141
22
How well staff explained how the bank could help with
1 2 3 4 5 6 7
your enquiry
23
The follow-up that you received relating to your enquiry
1 2 3 4 5 6 7
(if received)
24
The literature given to you in relation to your enquiry (if
1 2 3 4 5 6 7
received)

Section 3: Attractiveness of alternative

Think about the potential alternative bank, I might Fairly Very Extremely
Extremely Very Neutral Fairly
change original bank service provider based on several unlikely unlikely
unlikely
likely
likely likely
reasons:
25
I might change my banking service provider due to
time cost (e.g. more fast service that the alternative 1 2 3 4 5 6 7
bank provides)

26
I might changed my banking service provider due to
monetary cost (e.g. more preferable interest that the 1 2 3 4 5 6 7
alternative bank provides)

27
I might changed my banking service provider due to
psychology factors (e.g. the alternative bank has better 1 2 3 4 5 6 7
reputation among my relatives)

28 I might changed my banking service provider due to

location of my job (e.g. I just chage another job, the 1 2 3 4 5 6 7
alternative bank is near by to my new office)
29 I might changed my banking service provider due to
deposit security (e.g. more stable financial statement 1 2 3 4 5 6 7
that the alternative bank provides)

142
Section 4: Affective commitment

Fairly Very Extremely

Extremely Very Neutral Fairly
unlikely likely likely
unlikely unlikely likely

30 I established such interpersonal relationships mainly

1 2 3 4 5 6 7
due to the discount provided to me
31 I established such interpersonal relationships mainly
1 2 3 4 5 6 7
due to the customization service provided to me
32 I established such interpersonal relationships mainly
1 2 3 4 5 6 7
due to my personal preference
33 I established such interpersonal relationships mainly
1 2 3 4 5 6 7
due to my emotional needs

Section 5: Continuance commitment

Fairly Very Extremely

Extremely Very Neutral Fairly
unlikely likely likely
unlikely unlikely likely

34 There are few existing alternatives for the certain bank

I most frequently visited. 1 2 3 4 5 6 7

35 There are few personal sacrifice of mine, if I switch the

bank to another 1 2 3 4 5 6 7

143
Section 6: Customer loyalty
Fairly Very Extremely
Extremely Very Neutral Fairly
unlikely likely likely
unlikely unlikely likely

36
You would use the service of the certain bank in the
1 2 3 4 5 6 7
future
37 If you were advising a friend or colleague on their
choice of bank, how likely would you be to 1 2 3 4 5 6 7
recommend the branch you visit most often?

Thank you for taking time to fill in this questionnaire.

144
 Appendix B: Reliability and validity test

1) Pilot test for first 100 samples

Reliability Statistics

Cronbach's
Alpha Based on
Cronbach's Standardized
Alpha Items N of Items

.321 .321 2

2) Test for full samples

Reliability Statistics

Cronbach's
Alpha Based on
Cronbach's Standardized
Alpha Items N of Items

.703 .703 2

145
 Appendix C: Frequency and statistics of demographics

Statistics

gender age education job status annual income

N Valid 317 317 317 317 317

Missing 0 0 0 0 0

Mean .49 1.75 1.38 4.59 1.33

Std. Deviation .501 .852 .887 3.160 .993

Skewness .057 .409 -.335 .024 .103

Std. Error of Skewness .137 .137 .137 .137 .137

Kurtosis -2.009 -.595 -.953 -1.545 -1.071

Std. Error of Kurtosis .273 .273 .273 .273 .273

Minimum 0 0 0 0 0

Maximum 1 4 3 9 3

gender

Cumulative
Frequency Percent Valid Percent Percent

Valid male 163 51.4 51.4 51.4

female 154 48.6 48.6 100.0

146
 gender

Cumulative
Frequency Percent Valid Percent Percent

Valid male 163 51.4 51.4 51.4

female 154 48.6 48.6 100.0

Total 317 100.0 100.0

age

Cumulative
Frequency Percent Valid Percent Percent

Valid 18-24 8 2.5 2.5 2.5

25-34 135 42.6 42.6 45.1

35-44 107 33.8 33.8 78.9

44-54 62 19.6 19.6 98.4

over 55 5 1.6 1.6 100.0

Total 317 100.0 100.0

147
 education

Cumulative
Frequency Percent Valid Percent Percent

Valid Secondary or below 69 21.8 21.8 21.8

Diplomat/ College 76 24.0 24.0 45.7

Bachelor 154 48.6 48.6 94.3

Master or higher 18 5.7 5.7 100.0

Total 317 100.0 100.0

job status

Cumulative
Frequency Percent Valid Percent Percent

Valid Student 2 .6 .6 .6

Professional/ consultant 119 37.5 37.5 38.2

Academic 3 .9 .9 39.1

Retired 1 .3 .3 39.4

Technician/ Operator 18 5.7 5.7 45.1

Housewife 9 2.8 2.8 47.9

Clerical/Administrative 70 22.1 22.1 70.0

Unemployed 31 9.8 9.8 79.8

Manager/ Executive 2 .6 .6 80.4

148
 Other 62 19.6 19.6 100.0

Total 317 100.0 100.0

annual income

Cumulative
Frequency Percent Valid Percent Percent

Valid Under 15,000 80 25.2 25.2 25.2

15,000 – 30,001 94 29.7 29.7 54.9

30,001 – 45,000 102 32.2 32.2 87.1

Over 45,001 41 12.9 12.9 100.0

Total 317 100.0 100.0

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation Skewness Kurtosis

Statistic Statistic Statistic Statistic Statistic Statistic Std. Error Statistic Std. Error

age 317 0 4 1.75 .852 .409 .137 -.595 .273

education 317 0 3 1.38 .887 -.335 .137 -.953 .273

job status 317 0 9 4.59 3.160 .024 .137 -1.545 .273

annual income 317 0 3 1.33 .993 .103 .137 -1.071 .273

Valid N (listwise) 317

149
 Appendix D: Demographic variances regression analysis

1) Analysis of ‘gender’ and ‘age’ for the building of commitment:

Descriptive Statistics

Dependent Variable:affective commitment

gender age Mean Std. Deviation N

male 18-24 18.0000 11.31371 2

25-34 17.0000 4.11719 83

35-44 18.7895 4.01665 57

44-54 18.1500 3.21632 20

over 55 18.0000 . 1

Total 17.7853 4.10471 163

female 18-24 18.8333 2.22860 6

25-34 16.7885 3.36846 52

35-44 16.9600 4.38439 50

44-54 17.1190 3.90873 42

over 55 20.0000 4.83046 4

Total 17.0974 3.87681 154

Total 18-24 18.6250 4.68851 8

25-34 16.9185 3.83435 135

35-44 17.9346 4.27205 107

150
 44-54 17.4516 3.70501 62

over 55 19.6000 4.27785 5

Total 17.4511 4.00415 317

a
Levene's Test of Equality of Error Variances

Dependent Variable:affective commitment

F df1 df2 Sig.

1.379 9 307 .197

Tests the null hypothesis that the error variance

of the dependent variable is equal across groups.

a. Design: Intercept + gender + age + gender *

age

Tests of Between-Subjects Effects

Dependent Variable:affective commitment

Type III Sum of Partial Eta

Source Squares df Mean Square F Sig. Squared
a
Corrected Model 206.637 9 22.960 1.450 .166 .041

Intercept 15670.693 1 15670.693 989.927 .000 .763

gender .028 1 .028 .002 .967 .000

age 73.774 4 18.444 1.165 .326 .015

gender * age 49.629 4 12.407 .784 .536 .010

151
Error 4859.855 307 15.830

Total 101606.000 317

Corrected Total 5066.492 316

a. R Squared = .041 (Adjusted R Squared = .013)

Multiple Comparisons

affective commitment
Tukey HSD

95% Confidence Interval

Mean Difference
(I) age (J) age (I-J) Std. Error Sig. Lower Bound Upper Bound

18-24 25-34 1.7065 1.44777 .764 -2.2663 5.6792

35-44 .6904 1.45833 .990 -3.3113 4.6922

44-54 1.1734 1.49469 .935 -2.9281 5.2749

over 55 -.9750 2.26821 .993 -7.1991 5.2491

25-34 18-24 -1.7065 1.44777 .764 -5.6792 2.2663

35-44 -1.0161 .51498 .282 -2.4292 .3971

44-54 -.5331 .61040 .907 -2.2081 1.1419

over 55 -2.6815 1.81198 .576 -7.6537 2.2907

35-44 18-24 -.6904 1.45833 .990 -4.6922 3.3113

25-34 1.0161 .51498 .282 -.3971 2.4292

44-54 .4830 .63504 .942 -1.2596 2.2255

over 55 -1.6654 1.82043 .891 -6.6608 3.3300

152
44-54 18-24 -1.1734 1.49469 .935 -5.2749 2.9281

25-34 .5331 .61040 .907 -1.1419 2.2081

35-44 -.4830 .63504 .942 -2.2255 1.2596

over 55 -2.1484 1.84969 .773 -7.2240 2.9273

over 55 18-24 .9750 2.26821 .993 -5.2491 7.1991

25-34 2.6815 1.81198 .576 -2.2907 7.6537

35-44 1.6654 1.82043 .891 -3.3300 6.6608

44-54 2.1484 1.84969 .773 -2.9273 7.2240

Based on observed means.

The error term is Mean Square(Error) = 15.830.

153
154
2) Analysis of ‘Education’ for the building of commitment:

Descriptives

95% Confidence Interval for

Mean
Std.
N Mean Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

continuance Secondary or
69 7.3623 1.38236 .16642 7.0302 7.6944 2.00 10.00
commitment below

Diplomat/ College 76 7.7237 1.84462 .21159 7.3022 8.1452 3.00 12.00

Bachelor 154 7.3636 2.37860 .19167 6.9850 7.7423 2.00 13.00

Master or higher 18 6.7222 2.32140 .54716 5.5678 7.8766 2.00 11.00

Total 317 7.4132 2.07369 .11647 7.1841 7.6424 2.00 13.00

affective commitment Secondary or

69 16.4203 3.23313 .38922 15.6436 17.1970 5.00 24.00
below

Diplomat/ College 76 17.8553 3.52024 .40380 17.0509 18.6597 10.00 27.00

Bachelor 154 17.8571 4.32870 .34882 17.1680 18.5463 4.00 28.00

Master or higher 18 16.2222 4.97707 1.17311 13.7472 18.6973 5.00 23.00

Total 317 17.4511 4.00415 .22490 17.0086 17.8936 4.00 28.00

155
 Test of Homogeneity of Variances

Levene Statistic df1 df2 Sig.

continuance commitment 6.404 3 313 .000

affective commitment 4.568 3 313 .004

ANOVA

Sum of Squares df Mean Square F Sig.

continuance commitment Between Groups 16.477 3 5.492 1.281 .281

Within Groups 1342.387 313 4.289

Total 1358.864 316

affective commitment Between Groups 138.304 3 46.101 2.928 .034

Within Groups 4928.188 313 15.745

Total 5066.492 316

Robust Tests of Equality of Means

a
Statistic df1 df2 Sig.

continuance commitment Brown-Forsythe 1.365 3 85.896 .259

affective commitment Brown-Forsythe 2.733 3 73.388 .050

a. Asymptotically F distributed.

156
 Multiple Comparisons

Tukey HSD

95% Confidence Interval

Mean
Dependent Variable (I) education (J) education Difference (I-J) Std. Error Sig. Lower Bound Upper Bound

continuance commitment Secondary or below Diplomat/ College -.36137 .34437 .720 -1.2508 .5281

Bachelor -.00132 .30001 1.000 -.7762 .7736

Master or higher .64010 .54811 .648 -.7756 2.0558

Diplomat/ College Secondary or below .36137 .34437 .720 -.5281 1.2508

Bachelor .36005 .29031 .602 -.3898 1.1099

Master or higher 1.00146 .54286 .254 -.4007 2.4036

Bachelor Secondary or below .00132 .30001 1.000 -.7736 .7762

Diplomat/ College -.36005 .29031 .602 -1.1099 .3898

Master or higher .64141 .51586 .600 -.6910 1.9738

Master or higher Secondary or below -.64010 .54811 .648 -2.0558 .7756

Diplomat/ College -1.00146 .54286 .254 -2.4036 .4007

Bachelor -.64141 .51586 .600 -1.9738 .6910

affective commitment Secondary or below Diplomat/ College -1.43497 .65982 .133 -3.1392 .2693

Bachelor -1.43685 .57483 .062 -2.9216 .0479

Master or higher .19807 1.05020 .998 -2.5145 2.9106

Diplomat/ College Secondary or below 1.43497 .65982 .133 -.2693 3.1392

Bachelor -.00188 .55625 1.000 -1.4386 1.4348

Master or higher 1.63304 1.04014 .397 -1.0535 4.3196

157
Bachelor Secondary or below 1.43685 .57483 .062 -.0479 2.9216

Diplomat/ College .00188 .55625 1.000 -1.4348 1.4386

Master or higher 1.63492 .98841 .350 -.9180 4.1879

Master or higher Secondary or below -.19807 1.05020 .998 -2.9106 2.5145

Diplomat/ College -1.63304 1.04014 .397 -4.3196 1.0535

Bachelor -1.63492 .98841 .350 -4.1879 .9180

158
159
3) Analysis of ‘Job status’ for the building of commitment:
Descriptives

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

continuance Student 2 8.5000 .70711 .50000 2.1469 14.8531 8.00 9.00

commitment
Professional/ consultant 119 7.6975 2.07305 .19004 7.3212 8.0738 2.00 13.00

Academic 3 6.0000 2.00000 1.15470 1.0317 10.9683 4.00 8.00

Retired 1 6.0000 . . . . 6.00 6.00

Technician/ Operator 18 7.4444 1.85416 .43703 6.5224 8.3665 3.00 10.00

Housewife 9 7.3333 1.80278 .60093 5.9476 8.7191 5.00 11.00

Clerical/Administrative 70 7.4571 1.93133 .23084 6.9966 7.9177 4.00 12.00

Unemployed 31 7.7097 2.36916 .42551 6.8407 8.5787 2.00 12.00

Manager/ Executive 2 9.5000 2.12132 1.50000 -9.5593 28.5593 8.00 11.00

Other 62 6.6613 2.07201 .26315 6.1351 7.1875 2.00 10.00

Total 317 7.4132 2.07369 .11647 7.1841 7.6424 2.00 13.00

affective Student 2 17.5000 .70711 .50000 11.1469 23.8531 17.00 18.00

commitment Professional/ consultant 119 17.8319 4.05747 .37195 17.0954 18.5685 4.00 28.00

Academic 3 16.3333 4.16333 2.40370 5.9910 26.6756 13.00 21.00

Retired 1 10.0000 . . . . 10.00 10.00

Technician/ Operator 18 16.0000 5.16777 1.21806 13.4301 18.5699 5.00 24.00

Housewife 9 16.4444 4.90181 1.63394 12.6766 20.2123 10.00 27.00

Clerical/Administrative 70 17.6143 3.44435 .41168 16.7930 18.4356 10.00 27.00

Unemployed 31 19.1935 4.15066 .74548 17.6711 20.7160 5.00 27.00

Manager/ Executive 2 22.0000 2.82843 2.00000 -3.4124 47.4124 20.00 24.00

160
Other 62 16.2581 3.50613 .44528 15.3677 17.1485 8.00 24.00

Total 317 17.4511 4.00415 .22490 17.0086 17.8936 4.00 28.00

 Test of Homogeneity of Variances

Levene Statistic df1 df2 Sig.

a
continuance commitment .533 8 307 .831
b
affective commitment .635 8 307 .748

a. Groups with only one case are ignored in computing the test of homogeneity of
variance for continuance commitment.

b. Groups with only one case are ignored in computing the test of homogeneity of
variance for affective commitment.

ANOVA

Sum of Squares df Mean Square F Sig.

continuance commitment Between Groups 66.665 9 7.407 1.760 .075

Within Groups 1292.199 307 4.209

Total 1358.864 316

affective commitment Between Groups 349.169 9 38.797 2.525 .008

Within Groups 4717.323 307 15.366

Total 5066.492 316

161
162
163
4) Analysis of ‘Annual income’ for the building of commitment:

Descriptives

95% Confidence Interval for Mean

N Mean Std. Deviation Std. Error Lower Bound Upper Bound Minimum Maximum

continuance Under 15,000 80 7.2125 1.46429 .16371 6.8866 7.5384 2.00 10.00
commitment
15,001 – 30,000 94 7.2660 2.22002 .22898 6.8113 7.7207 2.00 12.00

30,001 – 45,000 102 7.6765 2.21678 .21949 7.2411 8.1119 2.00 13.00

Over 45,000 41 7.4878 2.35714 .36812 6.7438 8.2318 3.00 12.00

Total 317 7.4132 2.07369 .11647 7.1841 7.6424 2.00 13.00

affective Under 15,000 80 16.2750 3.61773 .40447 15.4699 17.0801 5.00 26.00
commitment 15,001 – 30,000 94 17.0000 3.52564 .36364 16.2779 17.7221 6.00 25.00

30,001 – 45,000 102 18.2843 4.31983 .42773 17.4358 19.1328 5.00 28.00

Over 45,000 41 18.7073 4.26171 .66557 17.3622 20.0525 4.00 28.00

Total 317 17.4511 4.00415 .22490 17.0086 17.8936 4.00 28.00

Test of Homogeneity of Variances

Levene Statistic df1 df2 Sig.

continuance commitment 3.856 3 313 .010

affective commitment 2.158 3 313 .093

164
 ANOVA

Sum of Squares df Mean Square F Sig.

continuance commitment Between Groups 12.558 3 4.186 .973 .406

Within Groups 1346.306 313 4.301

Total 1358.864 316

affective commitment Between Groups 265.299 3 88.433 5.765 .001

Within Groups 4801.193 313 15.339

Total 5066.492 316

Robust Tests of Equality of Means

a
Statistic df1 df2 Sig.

continuance commitment Brown-Forsythe .948 3 204.612 .418

affective commitment Brown-Forsythe 5.645 3 223.764 .001

a. Asymptotically F distributed.

165
 Multiple Comparisons

Tukey HSD

95% Confidence Interval

Mean Difference
Dependent Variable (I) annual income (J) annual income (I-J) Std. Error Sig. Lower Bound Upper Bound

continuance commitment Under 15,000 15,001 – 30,000 -.05346 .31548 .998 -.8683 .7614

30,001 – 45,000 -.46397 .30974 .440 -1.2640 .3360

Over 45,001 -.27530 .39834 .900 -1.3042 .7536

15,001 – 30,000 Under 15,000 .05346 .31548 .998 -.7614 .8683

30,001 – 45,000 -.41051 .29653 .510 -1.1764 .3554

Over 45,001 -.22185 .38816 .941 -1.2244 .7807

30,001 – 45,000 Under 15,000 .46397 .30974 .440 -.3360 1.2640

15,001 – 30,000 .41051 .29653 .510 -.3554 1.1764

Over 45,001 .18867 .38351 .961 -.8019 1.1792

Over 45,001 Under 15,000 .27530 .39834 .900 -.7536 1.3042

15,001 – 30,000 .22185 .38816 .941 -.7807 1.2244

30,001 – 45,000 -.18867 .38351 .961 -1.1792 .8019

affective commitment Under 15,000 15,001 – 30,000 -.72500 .59576 .617 -2.2638 .8138
*
30,001 – 45,000 -2.00931 .58492 .004 -3.5201 -.4985
*
Over 45,001 -2.43232 .75224 .007 -4.3753 -.4894

15,001 – 30,000 Under 15,000 .72500 .59576 .617 -.8138 2.2638

30,001 – 45,000 -1.28431 .55997 .102 -2.7307 .1620

Over 45,001 -1.70732 .73302 .094 -3.6006 .1860

166
 *
30,001 – 45,000 Under 15,000 2.00931 .58492 .004 .4985 3.5201

15,001 – 30,000 1.28431 .55997 .102 -.1620 2.7307

Over 45,001 -.42300 .72423 .937 -2.2936 1.4476

*
Over 45,001 Under 15,000 2.43232 .75224 .007 .4894 4.3753

15,001 – 30,000 1.70732 .73302 .094 -.1860 3.6006

30,001 – 45,000 .42300 .72423 .937 -1.4476 2.2936

*. The mean difference is significant at the 0.05 level.

167
168
Appendix E: regression analysis of five constructs

1) The roles of affective commitment and continuance commitment of building customer loyalty

Correlations

affective continuance
customer loyalty commitment commitment

Pearson Correlation customer loyalty 1.000 .522 .395

affective commitment .522 1.000 .563

continuance commitment .395 .563 1.000

Sig. (1-tailed) customer loyalty . .000 .000

affective commitment .000 . .000

continuance commitment .000 .000 .

N customer loyalty 317 317 317

affective commitment 317 317 317

continuance commitment 317 317 317

b
Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .537 .288 .283 1.36854

169
a. Predictors: (Constant), continuance commitment, affective
commitment

b. Dependent Variable: customer loyalty

b
ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 237.777 2 118.889 63.478 .000

Residual 588.090 314 1.873

Total 825.868 316

a. Predictors: (Constant), continuance commitment, affective commitment

b. Dependent Variable: customer loyalty

a
Coefficients

Unstandardized Standardized Collinearity

Coefficients Coefficients 95% Confidence Interval for B Correlations Statistics

Model B Std. Error Beta t Sig. Lower Bound Upper Bound Zero-order Partial Part Tolerance VIF

1 (Constant) 4.969 .360 13.815 .000 4.261 5.677

affective commitment .177 .023 .439 7.620 .000 .132 .223 .522 .395 .363 .683 1.465

continuance commitment .115 .045 .148 2.567 .011 .027 .204 .395 .143 .122 .683 1.465

a. Dependent Variable: customer loyalty

170
 a
Casewise Diagnostics

Case
Number Std. Residual customer loyalty Predicted Value Residual

131 -3.030 6.00 10.1468 -4.14677

164 -3.239 2.00 6.4321 -4.43209

205 -4.491 4.00 10.1468 -6.14677

301 3.036 14.00 9.8455 4.15448

a. Dependent Variable: customer loyalty

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 6.0241 11.3173 8.9180 .86744 317

Std. Predicted Value -3.336 2.766 .000 1.000 317

Standard Error of Predicted

.078 .400 .124 .047 317
Value

Adjusted Predicted Value 5.8623 11.3546 8.9164 .86613 317

Residual -6.14677 4.15448 .00000 1.36420 317

Std. Residual -4.491 3.036 .000 .997 317

Stud. Residual -4.522 3.048 .001 1.003 317

Deleted Residual -6.23093 4.18898 .00158 1.38202 317

Stud. Deleted Residual -4.670 3.089 .001 1.009 317

Mahal. Distance .040 26.051 1.994 2.709 317

Cook's Distance .000 .133 .004 .013 317

Centered Leverage Value .000 .082 .006 .009 317

171
 a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 6.0241 11.3173 8.9180 .86744 317

Std. Predicted Value -3.336 2.766 .000 1.000 317

Standard Error of Predicted

.078 .400 .124 .047 317
Value

Adjusted Predicted Value 5.8623 11.3546 8.9164 .86613 317

Residual -6.14677 4.15448 .00000 1.36420 317

Std. Residual -4.491 3.036 .000 .997 317

Stud. Residual -4.522 3.048 .001 1.003 317

Deleted Residual -6.23093 4.18898 .00158 1.38202 317

Stud. Deleted Residual -4.670 3.089 .001 1.009 317

Mahal. Distance .040 26.051 1.994 2.709 317

Cook's Distance .000 .133 .004 .013 317

Centered Leverage Value .000 .082 .006 .009 317

a. Dependent Variable: customer loyalty

172
173
174
2) The weights of service quality and attractiveness of alternatives for building customer loyalty

Correlations

Attractiveness of
Customer loyalty Service quality alternatives

Pearson Correlation customer loyalty 1.000 .625 .140

service quality .625 1.000 .163

attractiveness of alternatives .140 .163 1.000

Sig. (1-tailed) customer loyalty . .000 .006

service quality .000 . .002

attractiveness of alternatives .006 .002 .

N customer loyalty 315 315 315

service quality 315 315 315

attractiveness of alternatives 315 315 315

b
Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .626 .392 .388 1.26050

a. Predictors: (Constant), attractiveness of alternatives, service quality

b. Dependent Variable: customer loyalty

175
 b
ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 319.422 2 159.711 100.520 .000

Residual 495.721 312 1.589

Total 815.143 314

a. Predictors: (Constant), attractiveness of alternatives, service quality

b. Dependent Variable: customer loyalty

a
Coefficients

Unstandardized Standardized Collinearity

Coefficients Coefficients 95% Confidence Interval for B Correlations Statistics

Model B Std. Error Beta t Sig. Lower Bound Upper Bound Zero-order Partial Part Tolerance VIF

1 (Constant) 2.069 .589 3.509 .001 .909 3.228

service quality .066 .005 .618 13.820 .000 .056 .075 .625 .616 .610 .973 1.027

attractiveness of alternatives .016 .018 .039 .869 .386 -.020 .051 .140 .049 .038 .973 1.027

a. Dependent Variable: customer loyalty

a
Casewise Diagnostics

Case
Number Std. Residual customer loyalty Predicted Value Residual

164 -4.370 2.00 7.5085 -5.50851

205 -3.369 4.00 8.2460 -4.24604

176
271 3.033 10.00 6.1770 3.82300

a. Dependent Variable: customer loyalty

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 5.9900 11.5932 8.9048 1.00860 315

Std. Predicted Value -2.890 2.666 .000 1.000 315

Standard Error of Predicted

.071 .311 .116 .040 315
Value

Adjusted Predicted Value 5.9269 11.6391 8.9035 1.00857 315

Residual -5.50851 3.82300 .00000 1.25647 315

Std. Residual -4.370 3.033 .000 .997 315

Stud. Residual -4.407 3.108 .000 1.004 315

Deleted Residual -5.60080 4.01381 .00121 1.27424 315

Stud. Deleted Residual -4.543 3.152 .000 1.010 315

Mahal. Distance .008 18.086 1.994 2.445 315

Cook's Distance .000 .161 .005 .015 315

Centered Leverage Value .000 .058 .006 .008 315

a. Dependent Variable: customer loyalty

177
178
179
3) The transformation from service quality into affective commitment

Correlations

affective
commitment service quality

Pearson Correlation affective commitment 1.000 .478

service quality .478 1.000

Sig. (1-tailed) affective commitment . .000

service quality .000 .

N affective commitment 315 315

service quality 315 315

b
ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 1153.862 1 1153.862 92.517 .000

Residual 3903.681 313 12.472

Total 5057.543 314

a. Predictors: (Constant), service quality

b. Dependent Variable: affective commitment

a
Casewise Diagnostics

180
Case affective
Number Std. Residual commitment Predicted Value Residual

21 -3.195 8.00 19.2843 -11.28428

a. Dependent Variable: affective commitment

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 11.9613 22.5670 17.4381 1.91696 315

Std. Predicted Value -2.857 2.676 .000 1.000 315

Standard Error of Predicted

.199 .603 .267 .088 315
Value

Adjusted Predicted Value 11.8399 22.6088 17.4379 1.91540 315

Residual -11.28428 10.10457 .00000 3.52592 315

Std. Residual -3.195 2.861 .000 .998 315

Stud. Residual -3.205 2.866 .000 1.002 315

Deleted Residual -11.35386 10.13859 .00023 3.55393 315

Stud. Deleted Residual -3.254 2.900 .000 1.007 315

Mahal. Distance .001 8.163 .997 1.579 315

Cook's Distance .000 .079 .004 .009 315

Centered Leverage Value .000 .026 .003 .005 315

a. Dependent Variable: affective commitment

181
182
183
4) The transformation from attractiveness of alternatives into affective commitment

Correlations

attractiveness of continuance
alternatives commitment

Pearson Correlation attractiveness of alternatives 1.000 -.176

continuance commitment -.176 1.000

Sig. (1-tailed) attractiveness of alternatives . .001

continuance commitment .001 .

N attractiveness of alternatives 317 317

continuance commitment 317 317

b
Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .176 .031 .028 3.98979

a. Predictors: (Constant), continuance commitment

b. Dependent Variable: attractiveness of alternatives

b
ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 161.212 1 161.212 10.127 .002

184
 Residual 5014.308 315 15.918

Total 5175.521 316

a. Predictors: (Constant), continuance commitment

b. Dependent Variable: attractiveness of alternatives

a
Coefficients

Unstandardized Standardized 95% Confidence Interval for Collinearity

Coefficients Coefficients B Correlations Statistics

Model B Std. Error Beta t Sig. Lower Bound Upper Bound Zero-order Partial Part Tolerance VIF

1 (Constant) 26.897 .833 32.287 .000 25.258 28.536

continuance commitment -.344 .108 -.176 -3.182 .002 -.557 -.131 -.176 -.176 -.176 1.000 1.000

a. Dependent Variable: attractiveness of alternatives

a
Casewise Diagnostics

Case attractiveness of
Number Std. Residual alternatives Predicted Value Residual

314 -4.218 8.00 24.8306 -16.83062

a. Dependent Variable: attractiveness of alternatives

185
 a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 22.4196 26.2084 24.3438 .71426 317

Std. Predicted Value -2.694 2.610 .000 1.000 317

Standard Error of Predicted

.229 .645 .300 .103 317
Value

Adjusted Predicted Value 22.2699 26.2390 24.3377 .71593 317

Residual -16.83063 9.48050 .00000 3.98347 317

Std. Residual -4.218 2.376 .000 .998 317

Stud. Residual -4.228 2.390 .001 1.002 317

Deleted Residual -16.90882 9.59301 .00620 4.01211 317

Stud. Deleted Residual -4.347 2.408 .001 1.006 317

Mahal. Distance .040 7.258 .997 1.566 317

Cook's Distance .000 .050 .004 .007 317

Centered Leverage Value .000 .023 .003 .005 317

a. Dependent Variable: attractiveness of alternatives

186
187
188
5) The relationship between affective commitment and continuance commitment

Correlations

continuance affective
commitment commitment

Pearson Correlation continuance commitment 1.000 .563

affective commitment .563 1.000

Sig. (1-tailed) continuance commitment . .000

affective commitment .000 .

N continuance commitment 317 317

affective commitment 317 317

b
Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .563 .317 .315 1.71618

a. Predictors: (Constant), affective commitment

b. Dependent Variable: continuance commitment

189
 b
ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 431.108 1 431.108 146.373 .000

Residual 927.757 315 2.945

Total 1358.864 316

a. Predictors: (Constant), affective commitment

b. Dependent Variable: continuance commitment

a
Coefficients

Unstandardized Standardized Collinearity

Coefficients Coefficients 95% Confidence Interval for B Correlations Statistics

Model B Std. Error Beta t Sig. Lower Bound Upper Bound Zero-order Partial Part Tolerance VIF

1 (Constant) 2.323 .432 5.381 .000 1.473 3.172

affective commitment .292 .024 .563 12.098 .000 .244 .339 .563 .563 .563 1.000 1.000

a. Dependent Variable: continuance commitment

a
Casewise Diagnostics

Case continuance
Number Std. Residual commitment Predicted Value Residual

107 -4.365 3.00 10.4904 -7.49038

216 -3.587 2.00 8.1568 -6.15677

234 -3.005 3.00 8.1568 -5.15677

190
 a
Casewise Diagnostics

Case continuance
Number Std. Residual commitment Predicted Value Residual

107 -4.365 3.00 10.4904 -7.49038

216 -3.587 2.00 8.1568 -6.15677

234 -3.005 3.00 8.1568 -5.15677

a. Dependent Variable: continuance commitment

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 3.4895 10.4904 7.4132 1.16802 317

Std. Predicted Value -3.359 2.634 .000 1.000 317

Standard Error of Predicted

.097 .338 .129 .045 317
Value

Adjusted Predicted Value 3.5093 10.6834 7.4143 1.16748 317

Residual -7.49038 4.13493 .00000 1.71346 317

Std. Residual -4.365 2.409 .000 .998 317

Stud. Residual -4.420 2.414 .000 1.002 317

Deleted Residual -7.68338 4.14999 -.00101 1.72650 317

Stud. Deleted Residual -4.557 2.433 -.002 1.008 317

Mahal. Distance .013 11.285 .997 1.708 317

Cook's Distance .000 .252 .004 .015 317

Centered Leverage Value .000 .036 .003 .005 317

191
 a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value 3.4895 10.4904 7.4132 1.16802 317

Std. Predicted Value -3.359 2.634 .000 1.000 317

Standard Error of Predicted

.097 .338 .129 .045 317
Value

Adjusted Predicted Value 3.5093 10.6834 7.4143 1.16748 317

Residual -7.49038 4.13493 .00000 1.71346 317

Std. Residual -4.365 2.409 .000 .998 317

Stud. Residual -4.420 2.414 .000 1.002 317

Deleted Residual -7.68338 4.14999 -.00101 1.72650 317

Stud. Deleted Residual -4.557 2.433 -.002 1.008 317

Mahal. Distance .013 11.285 .997 1.708 317

Cook's Distance .000 .252 .004 .015 317

Centered Leverage Value .000 .036 .003 .005 317

a. Dependent Variable: continuance commitment

192
193
194
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