Journal of Business Research 63 (2010) 1103–1110

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Journal of Business Research

How corporate reputation, quality, and value influence online loyalty☆

Albert Caruana a,1, Michael T. Ewing b,⁎
a
Department of Marketing, University of Malta, Msida MSD 2080, Malta
b
Department of Marketing, Monash University, PO Box197, Caulfield East, VIC, 3145, Australia

a r t i c l e i n f o a b s t r a c t

Article history: This study considers the role of corporate reputation and its relation to quality, perceived value, and loyalty
Received 22 May 2008 in an online context. This milieu potentially challenges the relevance of the reported findings from the more
Accepted 2 April 2009 traditional retail marketing situations. In this respect, a number of important questions are raised concerning
how perceived value and quality impact on online loyalty and the effect corporate reputation has on this
Keywords: process. Research was conducted among customers of two diverse online vendors, one dealing in books and
Online retailing
the other in shares. Findings from the two samples suggest that corporate reputation has a direct effect on
Loyalty
Corporate reputation
online loyalty and provides an important mediating effect for perceived value and aspects of quality in terms
Value of their impact on online loyalty.
Quality © 2009 Elsevier Inc. All rights reserved.

1. Introduction reputation have on online loyalty? Why should customers prefer to

While bricks and mortar retailers can rely on location, online
retailers cannot (Rayport and Sviokla, 1994) and need to spend
considerable sums of money to attract customers (Watson et al.,
1998). The ability of retail websites to attract online traffic directly
affects the volume of business transacted online. Consequently,
customer acquisition remains a major expense for online retailers
(Noe and Parker, 2005). Moreover, it may be years before these newly
acquired customers deliver a positive return (Blattberg and Deighton,
1996). Thus, an understanding of loyalty antecedents will assist online
retailers to formulate and implement better customer retention
strategies. Here it is important to distinguish between ‘customer
retention’, (i.e. strategies that firms implement) and ‘customer
loyalty’, (i.e. a psychological state customers do or do not have). The
study of customer loyalty in conventional retailing is not new.
However, the issues that determine whether, and to what extent,
loyalty is different in the online environment have yet to be fully
resolved. The identification of factors that influence website loyalty
has received some scholarly attention (e.g., Srinivasan et al., 2002;
Tarafdar and Jie, 2008). Indeed, the web introduces an array of
‘challenges’ that may require a reassessment of the role of some of the
more widely accepted drivers of loyalty. For example, how do
customers find an online retailer? What effect does corporate
☆ The authors thank Parsu Parasuraman, Michel Laroche, Lydia Windisch and two
anonymous reviewers for useful suggestions on earlier drafts.
⁎ Corresponding author. Tel.: +61 39903 2563; fax: +61 39903 2900.
E-mail addresses: albert.caruana@um.edu.mt (A. Caruana),
michael.ewing@buseco.monash.edu.au (M.T. Ewing).
1
Tel.: +356 2340 2431; fax: +356 2134 5655.
patronize one online retailer over another? How do perceived quality
and value influence online loyalty? This paper seeks to address these
questions, by revisiting the focal construct of loyalty and considering
the role of corporate reputation, value and quality in an online context.
2. Literature review and hypotheses
2.1. Loyalty
Early research on loyalty focused on brand loyalty and emphasized
behavioral dimensions (Cunningham, 1956; Jacoby, 1971; Tucker,
1964). Day (1969) was among the first to highlight the role of a
positive attitude in the purchase decision, while Jacoby and Chestnut's
(1978) conceptual definition of brand loyalty reflects both behavioral
and attitudinal aspects. Primarily because of measurement issues,
numerous studies have considered loyalty only from a purchase
intention perspective (e.g., Andreassen and Lindestad 1998a,b;
Homburg and Giering, 2001; Taylor and Baker, 1994), bypassing
both attitudinal and behavioral aspects presumably on the assump-
tion that intentions are good predictors of actual behavior. Cognitive
loyalty, that involves the consumer rationally and consciously
evaluating the attributes and benefits of competing offerings before
the purchase takes place, has also received limited attention (Gremler
and Brown 1996; Sirohi et al., 1998). In addition, only a few studies
consider multiple aspects of loyalty. Macintosh and Lockshin (1997)
look at the attitude–intention–behavior aspects of loyalty. Oliver
(1996: 392) defines customer loyalty as “a deeply held commitment
to re-buy or re-patronize a preferred product or service consistently in
the future, despite situational influences and marketing efforts having
the potential to cause switching behavior”. Oliver (1996, 1999) argues

0148-2963/$ – see front matter © 2009 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2009.04.030
1104 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110
there are four sequential stages (cognitive–affective–intention–
behavior) to achieve customer loyalty. In the first stage, the customer
is cognitively loyal and only after repeated purchase does s/he
develop affective loyalty. Affective loyalty involves a desire to
maintain the behavior based on a generalized sense of a higher
positive regard for, a liking of, and an enjoyment of the product or
service experience. After the passage of time and repeated purchases,
customer loyalty becomes conative, whereby the customer has strong
intentions of future exchanges based on a favorable evaluation of the
current experience and on a willingness to make an effort to maintain
the relationship. Finally, referring to ‘action control’ theory (Kuhl and
Bechmann, 1985), Oliver identifies the most intense stage of customer
loyalty as action loyalty. This stage is sustained by strong motivations
and results in actions undertaken by the ‘desire to overcome’ every
possible obstacle that might be in the way of the decision to buy the
brand to which the person is loyal.
2.2. Corporate reputation
Many customers have difficulty remembering even prominent
websites and are reluctant to pay for products from online retailers
they know little about. Thus, a strong corporate reputation can be a
major asset to online retailers. Corporate reputation results from the
reception of direct and indirect experiences and information (Fombrun
and Shanley, 1990; Ruth and York, 2004; Yoon et al., 1993) and from
firms' past actions (Weigelt and Camerer, 1988). Firms interact with a
multitude of publics, each of whom often considers a different set of
attributes as important. Fombrun's (1996) attitudinal definition of
corporate reputation holds that it represents the net affective or
emotional reaction and involves the overall estimation in which a firm
is held by its constituents. A number of operational definitions of
corporate reputation have centered on the object specific components on
which this overall evaluation is based, considering how well known a
firm is; good or bad, reliable, trustworthy, believable and reputable
(Brown, 1995; Levitt, 1965).
Corporate reputation has been related to a number of beneficial
consequences for the firm including the intention to purchase tangibles
(Grewal et al., 1998) and intangibles (Andreassen, 1999; Yoon et al.,
1993). There appears to be little doubt that consumers generally
consider the reputation of the firm before undertaking a purchase
decision (Zeithaml, 2000) and that issues of trust affect consumers'
intention to purchase online (Ha and Stoel, 2009).
H1. The higher the corporate reputation, the stronger the level of
online loyalty.
2.3. Perceived value
Reichheld and Schefter (2000) note that loyalty is not won with
technology but through delivering a consistently superior customer
experience. But why should customers prefer to patronize one online
retailer over another? A better understanding of the elements that
shape the online experience is particularly critical in online marketing.
Drawing on attribution theory (Folkes, 1988), it is expected that
customers will attribute the corporate reputation of the firm to such
variables as perceived value and perceived quality. Corporate reputa-
tion, in turn, will influence loyalty and ultimately, purchase decisions.
Zeithaml's (1988) review of extant literature and exploratory research
identifies four consumer definitions of product value: (1) value is low
price; (2) value is whatever I want in a product; (3) value is the quality I
get for the price I pay; and (4) value is what I get for what I give. She
synthesizes these definitions and defines perceived value as “the
consumer's overall assessment of the utility of a product based on
perceptions of what is received and what is given” (Zeithaml, 1988: 14).
How much the customer values the product offering is critical to the
success of any firm (Keeney, 1999; Ruiz et al., 2008). Utility theory
(Lancaster, 1971), which stresses that consumers do not buy offerings
for their own sake, provides the theoretical underpinning for the value
construct. Customers buy bundles of attributes that together represent a
certain quality of offering by a firm at a certain price level, thus deriving
value according to the utility provided by the combination of attributes
less the disutility represented by the price paid and other costs. Internet
commerce is not a product but a means to purchasing products (Keeney,
1999). If firms utilize the Internet as a means of generating revenue,
online customers must come to perceive a higher value offering, both in
terms of quality received and costs sustained.
Most literature and empirical findings report a direct effect of
value on loyalty (Blackwell et al., 1999; Cronin et al., 2000; Sirohi
et al., 1998). This effect is present at different stages of the life cycle of
a product, although other variables reportedly mediate the effect of
value on loyalty intentions (Johnson et al., 2006), and value may
mediate the effect of other variables on loyalty (Gruen et al., 2006).
Given the support in the literature for the link between value and
loyalty, the expectation is that the relationship will also hold in the
online context.
H2a. The higher the level of perceived value the higher the level of
online loyalty.
Although literature is scarce in this area, the link between value and
loyalty may be both direct and indirect via corporate reputation. Neal
(1999) argues that value, rather than satisfaction, drives loyalty. The role
of value in influencing loyalty is also supported by other authors (e.g.
Garbarino and Johnson, 1999; Sirdeshmukh et al., 2002; Woodruff,
1997). However, Agustin and Singh's (2005) work suggests that value is
a hygiene factor, without which there can be no loyalty. While these
authors have focused on trust, this study has highlighted literature that
suggests that corporate reputation is associated with loyalty (e.g.
Andreassen and Lindestad, 1998a,b; Chia-Hung, 2008). Thus, corporate
reputation may be an overlooked motivator variable that mediates the
relationship between value and loyalty. A partial mediation hypothesis
recognizes that there is a lack of full understanding of the underpinning
of a specified relationship and the precise nature of the interrelation-
ships. The partial mediation recognizes the potential motivating effect of
corporate reputation on the link between perceived value and online
loyalty.
H2b. The interaction between perceived value and corporate reputa-
tion will explain more in the variance of online loyalty than the direct
influence of either perceived value on online loyalty (H2a) or of
corporate reputation on online loyalty (H1).
2.4. Quality
Perceived quality involves the consumer's judgment about the
extent of superiority or excellence of the product (Zeithaml, 1988). An
important development in contemporary marketing is the shift in
focus from ‘product’ towards ‘process’ (Deighton, 1998). The Internet
allows for the development and aggregation of systems that enhance a
firm's offering and enable customers to personalize their own
computing environment. Online purchase experiences incorporate
both a tangible or intangible core product along with supporting
processes that together influence quality as perceived by the customer.
Firms increasingly see themselves as service providers where the
tangible product is an integral part of the service (Rust, 1998). An
important aspect of quality concerns the service-offering element.
Conceptually, service quality involves “the consumer's judgment about
an entity's overall excellence or superiority” (Parasuraman et al., 1988).
Operationally, definitions of service quality revolve around the idea that
customers make a comparison between their expectations about a
service and their perception of service performance (Lewis and Booms,
1983; Grönroos, 1984; Parasuraman et al., 1985, 1988, 1994). Zeithaml
 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110
et al.'s (1996) review of the behavioral effects of service quality
identifies loyalty as one consequence of service quality. Using an online
service quality measure, Gefen (2002) found a significant relationship
with the tangible SERVQUAL dimension, but not with empathy or the
amalgamated dimension of responsiveness, reliability and assurance.
More recently, Naidoo and Leonard (2007) report links between service
quality and e-service continuance. Although generally there has been
a failure to use measures specific to online settings, this aspect is
beginning to receive more attention. Wolfinbarger and Gilly (2003)
provide a psychometrically sound instrument termed ‘eTailQ’, compris-
ing four elements of online quality: fulfillment/reliability, customer
service, website design, and privacy and security. The expectation that
Internet quality positively affects online loyalty extends to the four
identified elements of Internet quality.
H3a. The higher the level of fulfillment/reliability the higher the level
of online loyalty.
H3b. The higher the level of customer service the higher the level of
online loyalty.
H3c. The higher the level of website design the higher the level of
online loyalty.
H3d. The higher the level of privacy/security the higher the level of
online loyalty.
A link is likely to exist between online service quality and corporate
reputation (e.g., Fombrun, 1998; Zeithaml, 2000). The conceptual
model by Zeithaml (2000), which links service quality to profitability,
distinguishes between defensive and offensive marketing and lists
reputation as one of the offensive marketing outcomes of service quality
that ultimately lead to profitability. She contends that evidence from
Profit Impact of Marketing Strategies (PIMS) suggest that service quality
improves reputation and other outcomes, yet confirmation of this link
via empirical research is scarce. Yoon et al. (1993) argue that a
consistently high quality product offering is the attribute given most
importance by the consumer public when considering corporate
reputation. Despite scant empirical support for this link, the existence
of a positive relationship between the online dimensions of quality and
corporate reputation is expected. Therefore,
H4a. The higher the level of fulfillment/reliability the higher the level
of corporate reputation.
H4b. The higher the level of customer service the higher the level of
corporate reputation.
H4c. The higher the level of website design the higher the level of
corporate reputation.
H4d. The higher the level of privacy/security the higher the level of
corporate reputation.
The research model in Fig. 1 shows the hypotheses.
3. Method
3.1. Measures
In all, 29 items capture online loyalty, corporate reputation, perceived
value and online retail (eTail) quality. Oliver's (1996) 4-item scale
measures loyalty and Brown's (1995) 6-item bipolar semantic differen-
tial scale measures corporate reputation. Rather than use a single item
measure of perceived value, the present study uses a 5-item instrument
developed by Dobbs et al. (1991). Wolfinbarger and Gilly's (2003) 14-
item eTailQ instrument is used to capture the four online quality aspects
of fulfillment/reliability (3 items), customer service (3 items), website
1105
design (5 items) and privacy/security (3 items). Table 1 provides item
details together with means and standard deviations for the two
datasets. Previous studies using the same scales employed in this
research report strong psychometric properties with acceptable reli-
ability and validity. A number of classificatory demographic variables
were also collected.
The approach employed may raise concerns regarding the possibility
of common method bias providing alternative explanations to any
resulting relationship found among constructs (Podsakoff et al., 2003).
Therefore, Harman's single factor test was employed whereby all the
items measuring the constructs were subject to an exploratory factor
analysis. In both data sets, examination of the resultant unrotated factor
solutions indicated an absence of a single dominant factor or one that
accounted for the bulk of the variance, thus providing support for an
absence of major common method bias in the data.
3.2. Data collection
Two Internet vendors, one selling books in South Africa, the other
providing online share trading facilities in Australia, agreed to assist
with data collection for this research. Given their suitability for the
research task, these vendors demonstrated their willingness to allow
access to their customer databases—thus making available an
invaluable resource seldom granted to academic researchers. These
two countries display marked cultural diversity while the two online
vendors added further product diversity, thus allowing testing of the
research model (Fig. 1) in two quite different environments. Fortu-
nately, both countries use English as their main commercial language
thereby eliminating the need for translation. The participating firms
sent emails to a sample of their customer database to invite the
customers to visit an online questionnaire. Following Crouch and
Housden (1996), a systematic, quasi-random sampling procedure was
employed, whereby every nth customer was selected by dividing the
entire customer database by the pre-determined sample size
(N = 3000). After two weeks, there were 1165 and 692 usable replies
for the books and shares samples, representing effective response rates
of 39% and 23% respectively. In terms of classificatory variables for the
book sample: 51.8% female; 53.6% were married and 30.7% were
single; 53.6% made use of the Internet primarily from work while the
mean age was 38.4 years (sd. 11.8) and the mean number of years
respondents had been using the Internet was 6.6 (sd. 3.7). For the
shares sample: 13.3% were female, 66.6% were married and 25.4% were
single; 20.7% made use of the Internet primarily from work while the
mean age was 47.9 years (sd. 13.5) and the mean number of years
respondents has been using the Internet was 14.6 (sd. 8.5). The
classificatory variables of respondents indicate some marked differ-
ences. However, a comparison of the construct means between
respondents in the first quartile with those in the last quartile indi-
cated no statistically significant differences. These findings provide
support for an absence of non-response error in the data.
4. Results
Having developed this model using established theories as the
basis for the constructs, and given that the relationships between these
constructs and all measures have demonstrated robust psychometric
properties in previous research, use is made of single step structural
equation analysis whereby the simultaneous estimation of both the
measurement and structural models is undertaken. The measurement
model maps the relationships between the constructs (latent
variables) and their items (indicators). This process provides a
confirmatory technique that allows assessment of the reliabilities
and validities of the constructs used. Concurrently, the structural
model enables testing of the potential causal dependencies between
constructs as indicated by the hypotheses in the study. The items
constituting the constructs in each of the customer populations of the
1106 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110
Fig. 1. Research model.
two retailers investigated are treated as indicators and used to
compute the two input covariance matrices in a LISREL analysis. In
evaluating the goodness of fit of a model, three aspects need to be
considered: overall model fit, measurement model fit and structural
model fit.
4.1. Overall model fit
The relevant overall fit indices for each of the two models
investigated appear in the first section of Table 3. The data provide
chi-squared values of 2138 and 1178 for the books and shares samples
respectively (each with 359 degrees of freedom, p = .00). To further
assess model fit it is necessary to look beyond the chi-squared value
and consider a number of additional indices. Thus with a Root Mean
Square Error of Approximation (RMSEA) of .065 and .057; Compar-
ative Fit Index (CFI) of .94 and .96 and Tucker Lewis Index (TLI) of .98
and .99 for the books and shares data respectively, it can be said that
these fit indices provide values that support a good model fit for both
data sets.
4.2. Measurement model fit
The measurement model outputs in Table 1 (columns 3 and 4)
show similar results for both samples. All 29 standardized loadings are
high and have t-values that are significant (p b 0.01). All standard
errors are small and therefore acceptable. Thus, all indicators relate to
their specified constructs, thereby confirming the postulated relation-
ships among indicators and constructs. The next step involves the
assessment of the psychometric properties of the constructs in terms
of reliability and validity to ensure that the specified indicators are a
sufficient representation of the constructs. Reliability estimates for
each construct using coefficient alpha (Cronbach, 1951) and compos-
ite reliabilities all exceed the threshold 0.70 level (Nunnally, 1967).
The computed average variance extracted shows the degree of shared
representation of the indicators with the constructs. The lowest values
for variance extracted are for website design at 0.51 and 0.52 for the
books and shares samples respectively. All shared variances extracted
for each construct are acceptable as they exceed the recommended
0.50 value (Bagozzi and Yi, 1988; Fornell and Larker, 1981)—see
Table 1. To investigate the discriminant validity of the constructs,
Fornell and Larcker (1981) suggest calculating whether the average
variance extracted is greater than the square of the construct's
correlations with the other factors. It can be seen from Table 2 that on
this stringent test, discriminant validity is supported in all cases
except with respect to website design where it is just below the
acceptance threshold and echoes the results reported by Wolfinbarger
and Gilly (2003). Overall, the measurement model statistics provide
support for the psychometric properties of the survey instruments
used and it is possible to proceed to consider the results obtained from
the structural model.
4.3. Structural model fit
The results in Table 3 involve the analyses of the causal paths
hypothesized in the structural model. In both data sets, the models
support the same five hypotheses. Therefore, corporate reputation is
associated with online loyalty (H1); perceived value is associated with
both corporate reputation and online loyalty (H2a and H2b); customer
service is associated with corporate reputation (H4b); and website
design is associated with loyalty (H3c). The link between website
design and corporate reputation (H4c) is significant in the case of
books but not in the case of shares. On the other hand, a number
of links representing the hypotheses have t-values that are not
significant. Therefore, fulfillment/reliability and privacy/security are
not associated with online loyalty (H3a and H3d) or corporate
reputation (H4a and H4d), while customer service has no effect on
online loyalty (H4c) and website design has no effect on corporate
reputation (H3b).
 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110 1107

Table 1
Measures used with mean and standard deviation and measurement model results.

Construct and scale items Books Shares Standardized a. Coefficient alpha

(N = 1169) (N = 692) loadings b. Composite reliability
c. Variance extracted

Mean sd Mean sd Books Shares Books Shares

1. The very worst/best 5.3 1.3 5.5 1.2 .80 .81 a. .93 .94
2. The least/most reliable 5.5 1.4 5.6 1.3 .86 .89 b. .93 .94
3. The least/most reputable 5.7 1.3 5.5 1.3 .88 .93 c. .71 .73
4. The least/most believable 5.6 1.3 5.5 1.3 .91 .93
5. Not at all/the best known 5.2 1.6 5.0 1.4 .69 .63
6. The least/ most trustworthy 5.7 1.3 5.6 1.3 .88 .90
Corporate reputation 33.0 7.1 32.7 6.9
7. X website offers more benefits than others in its class 4.3 1.8 5.2 1.2 .83 .76 a. .87 .78
8. I have grown to like X website more than that of 4.5 1.9 5.2 1.3 .92 .84 b. .88 .81
any other competitor c. .65
9. I intend to continue making online Y purchases 5.8 1.6 6.0 1.3 .69 .72
with X over the next few years
10. When I have a need for Y I buy only from X. 3.8 2.2 5.0 1.4 .77 .55
Online loyalty 18.4 6.4 21.4 5.5
11. You get what you ordered from this site 6.5 1.3 6.3 1.2 .85 .90 a. .73 .93
12. The product that came was represented accurately 6.5 1.2 6.3 1.2 .76 .91 b. .79 .93
by the website
13. The product was delivered by the time promised 5.5 2.0 6.3 1.3 .62 .90 c. .56 .82
by the company
Fulfilment/Reliability 18.5 3.7 18.9 3.5
14. The company is ready and willing to respond to 6.1 1.4 5.7 1.5 .88 .88 a. .91 .92
customer needs b. .91 .92
15. Inquiries are answered promptly 6.0 1.4 5.8 1.6 .87 .88 c. .77 .78
16. When you have a problem, they show a sincere interest 6.0 1.5 5.6 1.4 .88 .89
in solving it
Customer Service 18.1 4.0 17.1 4.3
17. The level of personalisation at this site is about right, 5.8 1.5 5.8 1.4 .75 .76 a. .84 .86
not too much or too little. b. .84 .84
18. The site doesn't waste any time 6.0 1.4 5.8 1.6 .81 .79 c. .51 .52
19. It is quick and easy to complete a transaction 6.1 1.3 6.1 1.4 .69 .73
at this website
20. The website provides in-depth information 5.4 1.6 5.7 1.4 .63 .61
21. This website has good selection 6.0 1.3 6.0 1.2 .66 .69
Website design 29.3 5.6 29.4 5.6
22. The website has adequate security features 6.1 1.2 6.2 1.1 .86 .85 a. .92 .93
23. I feel safe in my transactions with this website 6.2 1.1 6.2 1.1 .91 .94 b. .92 .93
24. I feel like my privacy is protected at this site 6.1 1.2 6.2 1.2 .89 .91 c. .79 .81
Privacy/security 18.7 3.2 18.7 3.1
25. The products provided are very good value for money 5.6 1.4 5.5 1.5 .84 .89 a. .92 .95
26. At the prices indicated the products 5.1 1.6 5.3 1.5 .92 .95 b. .93 .95
are very economical c. .73 .81
27. The products are considered to be a very good buy. 5.5 1.5 5.3 1.6 .84 .95
28. The prices are very acceptable 5.2 1.5 5.2 1.5 .89 .94
29. The products appear to be a bargain 4.0 1.8 4.1 1.8 .75 .73
Perceived value 25.4 6.9 25.4 7.2

5. Discussion perceived value on online loyalty (H2a) also remains significant

The diagram in Fig. 2 provides an overview of the findings. The
results from both samples indicate that while the effect of perceived
value on corporate reputation (H2b) and the effect of corporate
reputation on online loyalty (H1) are each significant, the effect of
indicating the presence of a partially mediated effect rather than the
alternative fully mediated relationship hypothesized in H2b. Therefore,
perceived value has both a direct (.26 for books and .17 for shares) and
an indirect (.35 by .55 for books and .39 by .45 for shares) effect on
online loyalty. When structural equation modeling is used, the mediated

Table 2
Squared correlation values with variance extracted on the diagonal for all constructs in the two samples.

Corporate reputation Online loyalty Fulfilment/reliability Customer service Website design Privacy/security Perceived value

Corporate reputation .71/.73 .50 .22 .31 .29 .14 .35

Online .55 .65/.53 .31 .36 .44 .22 .41
Loyalty .17 .14 .56/.82 .53 .71 .40 .37
Fulfilment/reliability .28 .24 .46 .77/.78 .69 .29 .38
Customer service .34 .35 .41 .55 .51/.52 .48 .49
Website design .19 .12 .28 .32 .45 .78/.81 .29
Privacy/security .27 .37 .13 .23 .37 .24 .73/.81
Perceived value

The squared correlations below the diagonal are those for the books sample while those above are for shares sample. The diagonal shows the average variance extracted values for
the books and shares samples respectively.
1108 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110

Table 3
Path analysis results.

Overall model fit Books Shares

χ2 2138 1178
df 359 359
RMSEA .065 .057
CFI .94 .96
TLI .98 .99
Standardized path estimates and t-values

Path Standardized path estimate t-valuea Standardized path estimate t-valuea

H1: Corporate reputation → Online loyalty .55 17.64 .45 10.49

H2a: Perceived value → Corporate reputation .35 10.97 .39 9.19
H2b: Perceived value → Online loyalty .26 8.45 .17 3.62
H3c: Website design → Online loyalty .10 3.16 .29 5.88
H4b: Customer service → Corporate reputation .38 12.13 .32 7.32
H4c: Website design → Corporate reputation .27 5.09 ns ns

ns = not significant.
a
t values all significant at p b .05.

effect is inferred as the effect of perceived value on online loyalty (.26 for
books) plus the product of the indirect effect representing the effect of
perceived value on corporate reputation (.35 for books) and the effect of
corporate reputation on online loyalty (.39 for books) that provides a
total effect of .40 (Preacher and Hayes, 2007). In addition, corporate
reputation mediates the effect of customer service on online loyalty
(H4b and H1). These results highlight the pivotal role that corporate
reputation plays in the online context and underscores the importance
of management devoting resources to the enhancement of corporate
reputation.
Despite the increasingly salient and active role that corporate
reputation plays for both bricks and mortar and online businesses, it
tends to feature primarily in the corporate communications literature
and is less evident in mainstream marketing literature. The current
research highlights the important mediating effect that corporate
reputation has regarding online loyalty. Properly managed, a strong
reputation helps a firm become an employer of choice facilitating
greater success in recruiting top candidates and retaining high
performers. It also helps the firm become a supplier of choice; it attracts
new customers to the firm while maintaining share of wallet among
existing customers. A good reputation can also help a firm become an
investment of choice, enhancing its ability to attract lower cost capital
and create a price premium for its shares.
These results also indicate that perceived value and the quality of
customer service provided to web surfers are important antecedents to
corporate reputation. When a competitor's website is never more than a
click away, attention to the value of the online offering together with
superior customer service can provide Internet retailers with a strong
basis for differentiation. Given the ease with which customers can make
price comparisons, it is critical that management quotes competitive
prices. Management must ensure that websites are not just a fancy
front-end, but have an equally functional back-end with the capacity to
provide prompt replies to queries; be ‘manned’ by ready, qualified,
empowered and willing employees to deal with customers' questions

Fig. 2. Diagrammatic summary of results.

 A. Caruana, M.T. Ewing / Journal of Business Research 63 (2010) 1103–1110
and concerns; and demonstrate a sincere interest in solving problems or
issues.
Another interesting finding for the online bookstore customers is the
direct effect that website design (an integral feature of the front-end of a
web retailing business) has on online loyalty. To an extent this finding
echoes the results reported by Srinivasan et al. (2002) who noted a
positive effect of seven factors (customization, contact interactivity,
cultivation, care, community, choice, and character) on online loyalty.
These results also highlight the need for management to ensure that the
firm's website is user-friendly and meets users' requirements (i.e. book-
buying customers may not be interested in all book genres). As is often
remarked, today's consumers are increasingly ‘money rich and time
poor’ and systems that fit well into their lifestyle requirements, and
enable easy transaction completion, will be rewarded with increased
loyalty. In this sense, it is important that firms do not compel customers
completing a purchase order to enter numerous nonessential data fields.
Instead, systems should save and retrieve such information as necessary
via passwords or other means when different transactions require
different data. In addition, management needs to maintain a sufficiently
wide product portfolio and ensure the availability of in-depth product
information for different items.
The absence of any effect of two of the quality factors relating to
fulfillment/reliability and privacy/security on corporate reputation
and loyalty, is also interesting. These results mirror Gefen (2002) who,
using SERVQUAL, only found a relationship with the tangibles
dimension when investigating links between service quality and
loyalty. The present study finds no link with fulfillment/reliability,
despite the fact that other authors often hold reliability to be the more
important service quality dimension. One explanation could be that
the effect of these factors is indirect through other variables not
included in this model. Previous research highlights the effect of
service quality on satisfaction that, in turn, has a direct effect on
loyalty. It is possible that these online quality variables manifest their
effect via satisfaction. An alternative explanation may be that since
both samples surveyed existing customers, these customers may have
already accepted the online retailers as sufficiently reliable and secure
and therefore raise no further concern. In other words, these
conditions no longer provide points of differentiation.
The research approach adopted in this study has a few inherent
limitations. For example, use has been made of certain construct
conceptualizations where alternatives may exist. In addition, the choice
of product categories, and indeed countries (South Africa and Australia)
may restrict the generalizability of the findings. Like any study
employing such a model, this study also suffers from specification
error resulting from the omission of constructs (e.g., switching costs,
satisfaction).
There are a number of directions for future research that can
further assist our understanding of these relationships, particularly
the role of corporate reputation. Replication in other markets and
sectors to determine the generalizability of the findings reported in
this study would be a step towards addressing the above limitations.
An investigation of the antecedents of corporate reputation and how
these interact with online loyalty could be a further fruitful area of
research. For example, what is the role of customer satisfaction? Does
it impact loyalty directly or does corporate reputation mediate
the relationship? Consideration of other variables that affect online
loyalty would be appropriate to help address the present study's
limitations. Corporate credibility may, for example, impact customer
loyalty directly or indirectly via corporate reputation. An understand-
ing of the factors that affect online loyalty, the role of corporate
reputation and the impact of various variables should help firms
better manage their efforts and lead to long-term profitability. Future
research might consider different competitor firms within particular
categories as well as differences between users and non-users and
online and offline situations. In this respect, research can determine
if loyalty and online loyalty are conceptually different and whether
1109
researchers should consider developing alternative instruments to
capture online loyalty.
This paper began by examining loyalty in an online context, focusing
on key antecedent variables such as corporate reputation. In conclusion,
the findings show that despite inter-country, inter-product, and
classificatory variable differences between respondents in the two
samples, the same basic behaviors and explanations hold in both
datasets. A similar argument applies to the results of the antecedents to
online loyalty and the role of corporate reputation that broadly mirrors
the offline context. There again, the underlying antecedents of loyalty
may in fact be quite universal and largely context-independent.
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