A three-stage model of consumer relationship investment

Jeff Hess
California Polytechnic State University, Orfalea College of Business, San Luis Obispo, California, USA

John Story
The University of St Thomas, Cameron School of Business, Houston, Texas, USA, and

Jeffrey Danes
California Polytechnic State University, Orfalea College of Business, San Luis Obispo, California, USA
Abstract Purpose This paper aims to examine the sources of consumer-brand relationship investment, specically isolating the sources and outcomes of communality and exchange relationship characteristics. Design/methodology/approach The paper utilizes a survey-based empirical study and subsequent structural modeling approach to test a series of hypotheses concerning how brand performance perceptions inuence the development of consumer relationship connections. Findings The paper nds that perceptions of product performance and service quality inuence the development of brand reliability and brand delity respectively. Similarly, brand reliability is the primary source of an exchange orientation, while brand delity leads to communal brand connections and, ultimately, consumer-brand relationship investment. Research limitations/implications This research is limited by the scope of the sample, fast food restaurants. Future research should explore consumer relationship investment in other product and service categories in order to determine the extent to which relationship development processes vary by product category. Practical implications Brands that wish to develop enduring relationships with their customers must understand the relative impact of both personal and functional (exchange) relationship characteristics on the development of relationship investment. Each has a specic role to play and the roles of each vary at different relationship stages. Originality/value This research offers at least three signicant contributions to the marketing discipline and marketing practice. First, it introduces constructs and associated scales for brand delity, communality, exchange and relationship investment. Second, it demonstrates how brand service and product performance differentially contribute to two dimensions of consumer-brand relationships. Finally, it describes three discrete relationship development stages that play specic roles in the evolution of consumer-brand relationship investment. Keywords Customer relations, Brands, Trust, Relationship marketing Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this article.

1. Introduction
The relationship you have with your car isnt so different from your other relationships. Some burn hot, but dont last very long. Some burn for a while, but dont throw much heat. And some smolder beautifully for a long, long time (2009 Cadillac CTS advertisement).

It has been nearly two decades since Webster (1992), Kotler (1991) and others predicted a paradigmatic transformation in marketing, from a transactional orientation to one in which rms endeavor to build enduring relationships with their customers. In that time, marketing practitioners and academics have converged on the conclusion that customer relationships are essential to long-term business success
The current issue and full text archive of this journal is available at www.emeraldinsight.com/1061-0421.htm

(Gronroos, 1997; Gummeson, 2002). There is wide acceptance that committed business customers and consumers are more protable, more loyal and are even effective ambassadors for the brand. As a result, consumer marketers have shifted resources toward building long-term bonds in order to redeem the nancial benets offered by customers who seek relationship benets (Blackston, 1993; Brakus et al., 2009; Chamberlin, 2002; Dinnie, 2001). However, despite wide acceptance that long-term consumerbrand relationships represent a better return on investment than transactional satisfaction, there remains a range of theoretical approaches to: . how key relational constructs are dened; . the structural associations among constructs; . the role of relationship antecedents; and . the nature of customer behavioral outcomes, including brand loyalty (Bowden, 2009). The nomenclature of consumer relationships, namely trust and commitment, is fairly well established in marketing relationship literature, but these basic ideas offer multiple approaches to relationship development structures. Most relationship marketing articles rely on the fundamental trustcommitment structure developed among personal 14

Journal of Product & Brand Management 20/1 (2011) 14 26 q Emerald Group Publishing Limited [ISSN 1061-0421] [DOI 10.1108/10610421111107987]

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

Journal of Product & Brand Management Volume 20 Number 1 2011 14 26

relationship researchers (e.g. Kelley, 1979; Rusbult, 1980, 1983) and formalized for marketing relationships by Morgan and Hunt (1994). This structure places trust at the center of the relationship as a condition of the development of relationship commitment to, or investment in the relationship. The latter denes benet for both relationship partners (Duck, 1991). Morgan and Hunt (1994) focus on the strength of the trust-commitment association, conceiving of both as single dimension constructs. Sirdeshmukh et al. (2002) extend the trust-commitment structure by utilizing a multidimensional view of consumer trust in a brand, that requires perceptions of brand benevolence and competence to both exist before the trust condition is satised (Hess, 1995). Rather than commitment, however, Sirdeshmukh et al. (2002) predict single dimension economic value and subsequent transactional loyalty outcomes. Other similar consumer relationship models incorporate a multidimensional trust, but utilize single dimension relationship commitment as the terminal relationship disposition (Gutierrez, 2005; Lee et al., 2007). A third view extends the trust-commitment structure further by modeling both personal and functional relationship connections that result from the two dimensions of consumer trust (Hess and Story, 2005). We believe the dichotomy between personal and functional relationship objectives lies at the heart of ongoing uncertainty about how consumer relationship investment develops. As a result, we rst discuss consumer investment theory and the role of personal and functional benet imperatives. We then dene the key constructs in the investment model, introducing brand delity as the primary condition of personal brand relational connections or relational communality. Finally, we present a consumer relationship investment path model that extends the trust-commitment structure to track personal and functional relationship characteristics through multiple manifestations in the relationship development process. Specically, we test relationship investment among fast food customers, isolating three distinct transformational stages in which consumers evaluate potential relationship benets and determine whether to deepen relationship connections toward full emotional investment in the brand and relationship dened behavior.

2. Consumer investment theory

Both business-to-business and consumer relationship researchers owe many of their ideas about relationships to interpersonal relationship researchers. We rely specically on Rusbults (1983) investment model of interpersonal relationships (Kelley, 1979; Rusbult, 1980, 1983; Rusbult et al., 1988) that describes a process by which partners invest in relational connections in accordance with expected relationship benet accrual. Many of these same social psychologists resist the idea of similarly structured consumerbrand relationships, arguing that they are essentially economic exchange relationships, based only on the balanced reciprocation of economic costs and benets, yielding fair value for both the brand and the consumer (Berscheid, 1994; Clark et al., 1986). Marketing researchers Bagozzi (1995) and Peterson (1995) argued that alternative motivations, similar to those that sustain intimate personal relationships like those described by Rusbults (1983, 1980) investment model, also determine the nature of consumer-brand interactions. Thus, 15

consumer-brand relationships subsume goals that are both functional and personal in context, even assigning properties of emotionality and volition to brands (e.g. Belk, 1988; Mick and Fournier, 1995; Rook, 1985). In fact both personal and functional relational connections are required for invested consumer-brand relationships to form (Hess and Story, 2005). We dene relationship investment as a terminal attitudinal disposition. It is differentiated from transaction-oriented models by the introduction of relational benets that operate together with those dened by fair economic value exchange (Duck, 1991; Rusbult, 1983). When relational benets exist, beyond those offered by consumption utility, consumers may suspend their ongoing vigilance toward brand performance and begin to form personal connections, or invest in a relationship with the brand. In this way the investment model describes how rational evaluations of brand performance are moderated by consumer perceptions that a brand will provide psychic personal benets in addition to consumption utility. The result of these connections are consumer-brand relationships that are more enduring than those dened by transactional brand loyalty or customer satisfaction. The primary reason for the stability and protability of invested relationships is that they are insulated against external and experiential factors, such as competitor actions and brand failure that work against longterm consumer-brand associations (Bloemer and OdekerkenSchroder, 2002; Delgado-Ballester and Munuera-Aleman, 2001). Invested customers not only behave in ways that are benecial to the brand, they are committed to doing so. Finally, relationship investment is the culmination of a multistage developmental process, which begins when brand performance evaluations promote perceptions of brand delity and reliability (Hess, 1995; Rusbult, 1980; Sirdeshmukh et al., 2002), which respectively transform into communal and functional (exchange-based) brand connections and subsequent relationship investment (Clark et al., 1989; Duck, 1991). The three-stage consumer investment model examined extends Hess and Storys (2005) trust-based commitment model that denes consumer commitment as the ultimate relationship disposition and tracks personal and functional transformational processes. We replace commitment with investment, a more conceptually precise and descriptive terminology. The focal constructs at each stage reect personal and functional aspects of relational bonds, from developmental conditions dened by brand delity and brand reliability and their respective performance predictors, to communal and exchange characteristics that dene the nature of consumer-brand connections, to relationship investment and subsequent behavioral expectations. 2.1 Two components of consumer-brand trust: brand delity and brand reliability Trust is at the heart of any enduring relationship (Morgan and Hunt, 1994; Hess, 1995; Hess and Story, 2005; Sirdeshmukh et al., 2002). It is the central condition of personal and functional connections that turn specic brand performance into consumer investment (Breivik and Thorbjrnsen, 2008; Gundlach and Murphy, 1993; Massey and Dawes, 2007). While, building enduring customer relationships carries signicant rewards, it can also come at prohibitive cost and risk, and a rms competitive position on

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trust will go a long way toward dening the marginal benet of relationship investments. Our approach to trust denes the construct after the interpersonal view that trust is multidimensional (Hess, 1995; Johnson-George and Swap, 1982; Sirdeshmukh et al., 2002). It results from exogenous personal and functional performance indicators reecting the suitability of a brand for a long-term association as dened by the partners motivation (delity) and competence (reliability). In this way trust is the fundamental differentiator between enduring relationships and transactional consumer-brand dyads (Delgado-Ballester and Munuera-Aleman, 2001; Garbarino and Johnson, 1999; Morgan and Hunt, 1994; Sirdeshmukh et al., 2002). 2.1.1 Brand reliability Brand reliability, is a generalized attitude, most often based on future performance and it indicates the likelihood that a brand will be able to deliver on product and service promises (Hess, 1995; Johnson-George and Swap, 1982; Morgan and Hunt, 1994; Sirdeshmukh et al., 2002). Reliability can either describe a discrete transactional incident or reside as a cumulative construct resulting from a series of transactions (Garbarino and Johnson, 1999) and, once established for the brand in general, applies to beliefs about yet un-experienced attributes. For instance, if a consumer evaluates a brand or service provider as having reliable products and on-time delivery, it is likely that they will transfer those attitudes by way of brand reliability to an expectation of future product and service quality. Many denitions of trust depend heavily on the notion of expected performance, going so far as to dening the construct as the ability to rely on the future performance of a partner (Morgan and Hunt, 1994). In an investment relationship process model, reliability can be viewed as an initial screen through which potential relationship partners pass before more personal evaluations and those regarding partner motivation can occur. Consistent satisfaction with individual transactions builds brand reliability over time, but there are no illusions about the motivations of the company, which are also required for trust to develop. The latter also requires perceptions of brand delity. 2.1.2 Brand delity Fidelity allows for an environment where relationship benets are assigned value beyond those gained through temporal interaction or extended consumption utility. Fidelity is dened as a brands suitability for an invested relationship as indicated by its motivation to make the customer happy, rather than by its ability to do so, the latter being indicative of reliability. Inferred beliefs regarding rm motivation, in addition to those regarding competence and reliability, are required to establish an environment where consumer relationships can ourish (Thorbjornsen et al., 2002). Specically, brands communicate delity to consumers by doing things such as resolving problems quickly, greeting customers with friendly, efcient employees, taking the time to listen to customers issues, promoting human interaction and employing generous return policies and warranties (Hess and Story, 2005). Other indicators, such as the brands commitment to the community in which they reside and quickly responding to dissatisfaction may also be key contributors to delity (Johnson-George and Swap, 1982; Hess, 1995; Massey and Dawes, 2007). Within a denition of delity that includes the concept of altruism one nds the 16

justication for customers to transition from suspicious transaction partners, seeking only fair utility from each interaction, to relationship partners that suspend purely functional evaluations in favor of relationship benets calculations (Blau, 1977; Duck, 1991; Jones and Taylor, 2007). Consumer investment implies the potential that customers relationship motivations may be rewarded with brand betrayal, but brand delity as indicated by measures of brand care and altruism encourage investment and its ensuing benets despite these risks (Clark et al., 1989; Duck, 1991; Kelley, 1979; Rusbult, 1983). Entrenched relationships characterized by feelings of personal connection depend largely on delity, while reliability, as an indicator of past and future meeting of expectations, is primarily an indicator of functional connections. Together, delity and reliability combine to provide the conditions necessary for enduring customer-brand relationships characterized by relationship investment (Hess and Story, 2005). 2.2 Dening the nature of relational connections: communality and exchange characteristics We apply to brands the approach to consumer relationships elaborated by Clark and other in the social exchange literature (e.g. Clark, 1984; Clark and Mills, 1979, 1993; Clark et al., 1987, 1989) that distinguishes between communal and exchange relational connections, where the salience of relationship benets and their nature characterize two types of relationships. Broadly, communal relationships are like close or intimate personal relationships, such as those with friends, family members or romantic partners. In such relationships, the partner is often perceived to be unique and irreplaceable (Duck, 1991). Exchange relationships, on the other hand, are more like those with business partners and personal acquaintances (Clark et al., 1989). In typical relationships of this kind the relationship is largely organized around implicit and/or explicit calculations of costs and benets. Management of self-interest is a focal concern in such relationships and investment in the relationship is temporal and contingent upon a successfully negotiated balance between the functional benets received in return for the costs. Admittedly, many customer-brand relationships are primarily utilitarian or functional in nature, providing benets to the customer, such as reduced search cost and lower perceived risk, but may have limited value to marketers. Relationships based on communal connections, on the other hand, are more resilient to failure (Hess et al., 2003) and are modied with some emotional cost, since consumers must divest emotional ties to the brand to do so (Burnham et al., 2003). The implication of the communal/exchange dichotomy for relationship investment is that purely transactional exchange consumer relationships require less initial brand investment, but also result in less consumer investment and are, therefore, more transitory than communal consumer relationships. This conclusion is based on the notion that benet expectations differ between communal and exchange relationships. Partners in transactional exchange relationships expect balanced reciprocity or quid-pro-quo exchanges of benets (Sahlins, 1972). In consumer-brand exchange relationships the consumer expects a consumption reward in direct correspondence to the cost of the good or service. On the other hand, consumer partners in communal relationships will tolerate more generalized reciprocity or one-way ows of

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

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tangible benets (Clark and Mills, 1993). Blau (1977) described the unilateral nature of such relationships in which the psychological reward from giving replaces the more traditional nancial reward from getting. In these relationships the emotional connection in the relationship is its own reward (Moles, 1984) and, in this sense, the giving and receiving of reward is unbalanced. The combination of communal and exchange relational connections are both required for a consumer relationship to transcend one characterized primarily by either communality or transactional exchange of value into one described as invested (Rusbult, 1983). 2.3 A range of consumer behavior outcomes Previous consumer brand relationship research has dened transactional loyalty, or intent to continue purchasing the brands products, as the ultimate behavioral indicator of the nancial return on brand investment (Sirdeshmukh et al., 2002). A key implication of differentiated communal and exchange relational connections, however, is that multiple behavioral outcomes can be predicted based on the nature of such connections. Some consumer behaviors, such as intention to continue transacting with the brand or to recommend the brand, indicate economic returns based on share or revenue. Other outcomes, such as price insensitivity and willingness to forgive a brands failures are more oriented toward prot margins (Story and Hess, 2006). In addition to transactional loyalty, commonly referred to as brand loyalty, we specify additional consumer behavior measures that represent a range of potential nancial reward. Specically, we include measures of willingness to pay more for a brands products and willingness to go out of the way to nd a brands products along with transactional loyalty likelihood or recommending the brand.

accrual. The focal constructs at each stage of the model map to the relative depth of relationship development and play a specic role in the process. 3.1 Stage 1: motivation vs competence In the early stages of consumer-brand dyad evolution, discrete consumer-brand encounters are evaluated, rst independently, then as indicative of a larger structure that reects a brands qualications as a relationship partner (Hess and Story, 2005). Simply, consumer satisfaction with transactional brand performance determines evaluations of brand delity and reliability. The multidimensional trust that is at the core of the consumer investment model implies different predictors for reliability and delity. Reliability is the primary indicator of the brands ability to meet future expectations of functional performance and exchange value, the brands competence. Therefore, specic brand attributes that describe consistency, product quality and competitive pricing should primarily predict brand reliability (Hess and Story, 2005; Story and Hess, 2006). Brand delity is the repository of attributes that suggest the brand cares about customers, or is motivated to act in the consumers best interest (Hess, 1995; Sirdeshmukh et al., 2002). We propose that direct human contact characterized by responsiveness or a sense of concern for consumer welfare, and policies that communicate a willingness to stand behind promises will predict brand delity. Finally, we hypothesize that there is a causal relationship between reliability and delity. Specically, perceptions of brand delity are more likely to occur after reliability has been established, while reliability assessments can occur in a delity vacuum: H1. H2. H3. Service satisfaction positively inuences brand delity. Product satisfaction positively inuences brand reliability. Brand reliability positively inuences brand delity.

3. The consumer investment model

The fundamental thesis of the consumer investment model (see Figure 1) is that the nature and strength of consumerbrand relationships, and subsequent behavior, is ultimately determined by the accumulation of relational and economic benet indicators. We model a process wherein relationships pass through three transformational stages of development. At each stage relational bonds either deepen or stagnate based on evolving expectations of economic or relational benet Figure 1 Three-stage consumer investment model 3.2 Stage 2: from delity and reliability to communality and exchange orientation As a consumers experience with a brand moves beyond a rst time purchase to repeat purchases and consumption, perceptions of brand delity provide the condition necessary for the brand to become associated with personally laden memory nodes. In fact, consistent self-afrming need fulllment may foster a sense of affection toward, and

17

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

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intimacy with the brand that introduces a relationship benet structure independent of functional utility or exchange benets (Blau, 1977; Duck, 1991). The evolution from a temporary relationship formed with an initial or occasional purchase, through an exchange relationship with functional benet ows, to an increasingly communal relationship describes a process of emotional involvement culminating in investment a relationship with the brand. In this way communality is a mediator between delity and consumer investment. Similarly we hypothesize that reliability, and the associated perception of brand competence, is the condition necessary for an exchange disposition reective of a favorable cost benet view of the brand relationship (Clark et al., 1989; Duck and Wright, 1993): H4. H5. H6. Brand delity positively inuences communality. Brand reliability positively inuences exchange. Exchange positively inuences communality.

Investment positively inuences willingness to pay more for the brand. H10. Investment positively inuences willingness to go out of way to visit. H11. Investment positively inuences transactional loyalty. H12. Exchange positively inuences transactional loyalty. H9.

4. Research method
Data were collected via online survey using a national online panel demographically balanced to broadly represent the US adult population. See Table I for means and distribution by demographic category. Respondents were screened for usage of, and familiarity with, seven fast food restaurants In-NOut, McDonalds, Burger King, Wendys, Subway, Jack in the Box and Taco Bell. The fast food context was selected because brand evaluations rely on both product and service performance characteristics and there exist sufcient recognizable brand names across which to compare relative performance. All The brands were selected to represent a relatively narrow competitive set of restaurant chains that can readily be described as fast food restaurants. We chose to minimize moderating inuence of context-based factors by choosing a focused competitive set that should also include a broad range of ratings on focal constructs. Based on meeting minimum requirements (at least one visit in the last 60 days and somewhat familiar) respondents were randomly assigned to rate two fast food restaurants regarding detailed performance, past and intended behavior and relationship disposition toward the brand. Once brand sample quotas (150) were lled, respondents were assigned to remaining brands on a random basis. A total of 89 percent of invited panel members participated in the survey, resulting in a total of 1,350 usable surveys. Respondents were forced to answer all attitude and behavior questions, so there were no model-related missing data. The brand sample sizes are as follows: In-N-Out 136, McDonalds 209, Wendys 207, Jack in the Box 159, Taco Bell 192, Subway 169, Burger King 202. The average age of respondents was 35 and average income was approximately $75,000. A total of 55 percent of respondents were female. Respondents were distributed across US geographic regions. Respondents represented a broad range of age, income, education and geographic characteristics as is appropriate to represent a fast food consumer population. Table I reports each brands score on all key constructs and measures, demographic proles by brand, and cross-study demographic distributions. 4.1 Measures The three-stage relationship model includes seven multi-item scales to measure fast food product and service performance, endogenous relationship conditions (delity and reliability), relationship nature constructs (exchange and communality) and consummate relationship investment. All nal scales included three items, except relationship exchange and relationship communality, each of which lost an originally theorized item during the conrmatory factor procedure as the respective items deteriorated, rather than enhanced, internal consistency. Following Gerbing and Anderson (1988) and Joreskog and Sorbom (1989) all scales were analyzed for validity and reliability and meet acceptable requirements for internal consistency. Table II reports all scale reliabilities and 18

3.3 Stage 3: from relationship nature to investment and behavior Functionally-oriented connections usually form rst in consumer-brand relationships, but relationship depth and prot-inducing behaviors begin once personal connections overlay an exchange orientation and begin to moderate benet calculations (Aggarwal, 2005). In other words, an ongoing value-based relationship transforms into one in which the brand benets from consumers personal investment through the introduction of communality and personal attachment brand (Burnham et al., 2003; Duncan and Moriarty, 1998; Morgan and Hunt, 1994; Sheth and Parvatiyar, 1995). In the absence of the communal connections, long-term functional satisfaction, manifested in an exchange orientation, may still result in a transactional loyalty, intention to continue purchasing the brands products and likelihood of recommending the brand to others, that appears as behavioral commitment (Oliver, 1999; Reichheld, 2003). However, this loyalty is precarious and subject to minor interruptions in the functional benet structure upon which it is built (Fournier, 1998; Schulz, 2005). While these valuebased connections are sufcient to support ongoing transactional loyalty, consumer investment predicts additional relational outcomes that reect an unbalanced nancial benet structure that supports brand protability (Blau, 1977; Moles, 1984). Specically, invested customers should be willing to spend more for similar functional performance for brands with which they are motivated to continue a personal relationship and overcome inconvenience to purchase the brands products (Story and Hess, 2006). This is owed to the delity-sourced assumption that the brand will continue to provide relationship benets beyond consumption utility. We hypothesize relationship associations with two of these nancially unbalanced outcomes, but some authors (Priluck, 2003; Tax et al., 1998) have also suggested that personal investment will lead to a forgiveness of brand failure to the extent is does not threaten to undermine relationship benets. These behaviors all imply a sense of trust in the goodwill of the brand that goes beyond belief in the competence of the brand to execute a transaction and deliver goods in a timely and trouble free manner: H7. H8. Communality positively inuences investment. Exchange positively inuences investment.

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

Journal of Product & Brand Management Volume 20 Number 1 2011 14 26

Table I Sample disposition and construct mean scores

n
Total In-N-Out Wendys Subway Taco Bell Burger King Jack in the Box McDonalds 1,275 136 207 169 192 202 159 210 Male (%) 48 58 42 58 47 43 45 47 Income $57,765 $85,212 $51,324 $56,911 $56,055 $52,450 $59,683 $51,227 FOOD 5.21 6.05 5.34 5.53 5.06 4.93 5.23 4.69 SVC 4.73 5.89 4.87 4.95 4.30 4.51 4.40 4.52 REL 5.34 6.09 5.51 5.53 5.22 5.07 5.25 4.97 FID 4.52 5.42 4.82 4.59 4.21 4.28 4.23 4.32 EXCH 5.06 5.95 5.27 5.07 4.83 4.90 4.91 4.73 COM 2.80 3.64 3.36 2.53 2.56 2.56 2.45 2.63 INV 4.00 4.91 4.39 3.93 3.82 3.80 3.87 3.54

Table II Factor loadings and scale reliability

Construct/item Standardized estimate Has helpful and friendly employees Manager resolves any problems I might have Employees communicate clearly Has fast service 0.9 0.868 0.871 Scale reliability 0.916

Service satisfaction SVC1 SVC2 SVC3 Deleted

Product satisfaction (food) FD1 Has items I like to order FD2 Food is delicious FD3 Consistently good food Deleted Offers a wide variety of items Deleted Offers healthy choices Fidelity FID1 FID2 FID3 Reliability REL1 REL2 REL3 Exchange EX1 EX2 Deleted Communality COM1 COM2 Deleted Investment INV1 INV2 INV3 Transactional loyalty LOYL1 LOYL2

0.927 0.86 0.916 0.905

0.906 Will do what it takes to make me happy Will make any effort to resolve a problem Is very responsive to my needs 0.869 0.852 0.897 0.879 I know what to expect from restaurants Meets my expectations I am usually satised with my experiences 0.754 0.874 0.874 0.86 Products offer a good value for the money I get what I pay for I eat there for practical reasons 0.897 0.847

0.882 I feel like I have an emotional connection with brand I have a personal relationship with the brand Offers me a sense of comfort 0.879 0.888

0.854 In feel a sense of loyalty to them I am a committed customer Is for people like me 0.823 0.833 0.772 0.81 I am likely to continue visiting them in the future I often recommend them 0.814 0.752

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included and deleted items. Scale reliabilities ranged from 0.81 (transactional loyalty) to 0.93 (product satisfaction). 4.1.1 Brand reliability and brand delity Central to a multidimensional view of relationship investment is the notion of multi-component consumer trust as the source of relationship nature distinctions that determine relationship type. Interpersonal and commercial relationship literature both suggest at least three potential dimensions of consumer brand trust. Nearly all include a reliability/ competence dimension and an altruism/care dimension. Integrity is often included as a discrete, third construct in interpersonal relationship trust, but previous consumer studies suggest integrity (honesty) may be subsumed under the altruism dimension. The more expansive term delity is used in place of altruism to suggest the suitability of the brand for personal or communal relationship connections. Fidelity and reliability are each measured using three a priori items adapted from previous consumer relationship studies (Hess and Story, 2005; Johnson-George and Swap, 1982). 4.1.2 Communality, exchange and investment The central thesis of this research is that relationships have the potential to develop exchange and communal characteristics mediated by consumer trust. Ultimately, communality and exchange-based connections determine the strength and nature of the relationship. While many consumer attitude models rely on the notion of value for the money to represent the overall quality of a relationship, we isolate this idea under the purview of the exchange. To measure exchange we adapted scales previously used to measure exchange characteristics of consumer products (Hess and Story, 2005; Story and Hess, 2006), since the link between brand performance and relationship communality is reective of consumers willingness to bond with a brand in anticipation of relational benets beyond those accrued by functional performance. We adapted communality scales from those originally built for interpersonal relationships and tested in a commercial setting (Clark and Mills, 1979). In an effort to maintain construct integrity, we deleted an originally proposed item from each scale. This increased rather than decreased scale reliability and, since we have structural connections to other constructs, the two-item scales are suitable for identication (Chin et al., 2008). Consumer and business customer models generally identify commitment as the ultimate indicator of relationship strength. Many of these studies identify Rusbults (1983) interpersonal relationship investment model as the source of this conceptualization. We also draw from the interpersonal view of relationship investment to represent relationship strength, but retain the investment nomenclature as a valuable descriptor of consumer connections that are the source of commitmentrelated outcomes. 4.2 Performance antecedents of consumer-brand relationships and behavioral outcomes From a decision-makers perspective, the fundamental advantage of a multidimensional view of consumer relationships is the ability to more precisely evaluate return on investment. If one views brand performance on key product and service attributes as a function of direct and indirect brand investment, return on investment calculations depend on outcome measures that capture a range of consumer response to such performance. If, for instance, 20

customer satisfaction is the sole arbiter of successful performance, the importance of attributes that indicate brand delity may be hidden in lieu of an appropriate endogenous variable against which to evaluate their value to relationships. We further believe that such diagnostic performance indicators can be grouped based on underlying performance constructs. For the purposes of this analysis we compare two antecedent performance constructs. The constructs were empirically developed using exploratory factor analytic procedures (Gerbing and Anderson, 1988) whereby a list of ten individual performance attributes was culled to isolate two internally consistent, yet conceptually and statistically discriminant measurement scales. Table II reports the nal factor loadings as well as those of deleted items. Using a combination of factor analysis and reliability analyses, these potential measures were reduced to the items in Table II. For each group of items the overall scale reliability score (Cronbachs alpha) was greater than 0.80. Within each group of items, factor loadings for individual items were all greater than 0.70. 4.3 Results Our analysis focuses on how functional and personal relationship characteristics transform performance evaluations into communal and exchange relational characteristics, and ultimately investment and its outcomes. In order to isolate causal processes for purposes of testing and diagnosis, we evaluate three separate submodels, each of which represents a discrete relationship evolutionary stage. Fundamental to our thesis is the idea that relationship construct development is sequential. We are particularly interested in assessing the transition of communality-laden concepts as they pass through stages of the overall investment model[1] and how they differentiate relationship conditions and consumer segments. At each stage of the model, resident construct strength determines the subsequent path of relationship character as well as its strength and, at each stage, functional or communal characteristics predict the development of fully invested relationships. We attempt to mitigate misrepresenting modeled processes by isolating discrete submodels that describe contained processes (Shah and Goldstein, 2006). 4.3.1 Sub-model 1: service and product performance delity and reliability Sub-model 1 shown in Figure 1 was estimated using AMOS 16. The loading for one indicator of each construct was xed at 1.0 and the exogenous variables were allowed to correlate freely. Most commonly used t indices indicate a reasonably well-tting model (Savalei and Bentler, 2006), with x2 605:57 with 51 df, p , 0.001; CFI 0:97, NFI 0:96, PNFI 0.745 and RMSEA (90 percent CI) 0.092 (0.0850.099) (Table III). The PNFI (James et al., 1982), which attempts to account for the complexity of the model, is well above all recommendations for acceptable t cutoff levels. An adequate RMSEA (Hair et al., 2006) conrms this nding. The standardized estimates for product satisfaction . brand reliability (l 0:88, p , 0.001) and the service satisfaction . brand delity (l 0:53, p , 0.001) paths indicate the exogenous variables primacy as the chief predictors of reliability and delity respectively, in lieu of alternate, and non-hypothesized, paths product satisfaction . brand delity and service satisfaction . brand reliability. We also nd support for the recursive relationship between reliability and

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

Journal of Product & Brand Management Volume 20 Number 1 2011 14 26

Table III Test of structural model and research hypotheses

Hypothesis: path Estimate 0.53 0.88 0.45 CR 20.51 21.36 11.68

p-value
,0.001 ,0.001 ,0.001

Stage 1 H1. Service satisfaction > brand delity H2. Product satisfaction > brand reliability H3. Brand reliability > brand delity
CFI 5 0.97 NFI 5 0.96 PNFI 5 0.75 RMSEA 5 0.092 (0.085-0.099)

x2 605.57 df 51

Stage 2 H4. Brand delity > communality H5. Brand reliability > exchange H6. Exchange > communality
CFI 5 0.99 NFI 5 0.99 PNFI 5 0.64 RMSEA 5 0.043 (0.034-0.053)

0.56 0.91 0.001

10.78 17.18 1.71

,0.001 ,0.001 0.98

x2 98.12 df 45

Stage 3 H7. Communality > investment H8. Exchange > investment H9. Investment > willing to pay more H10. Investment > willing to go out of way H11. Investment > transactional loyalty H12. Exchange > transactional loyalty
CFI 5 0.95 NFI 5 0.95 PNFI 5 0.67 RMSEA 5 0.096 (0.088-0.103)

0.56 0.52 0.70 0.76 0.44 0.50

22.13 20.56 27.42 30.57 10.86 11.86

,0.001 ,0.001 ,0.001 ,0.001 ,0.001 ,0.001

x2 498.22 df 39

delity (l 0:45, p , 0.001). As a follow-up test of the nonrecursive relationship between reliability and delity we xed the one-way, reliable . delity path at 0.45 and re-ran the model. The standardized estimate of the delity . reliable path in this case was signicant, but much smaller than the hypothesized, recursive path (l 0:16, p , 0.001), sufcient to warrant further examination, but not to conceptually undermine the recursive hypothesis. Although not included in the formal hypotheses, it is encouraging that we have accounted for most of the variance in both endogenous variables with this relatively limited collection of exogenous attributes and associated constructs (Reliable, SMC 0:77; Fidelity, SMC 0:78). 4.3.2 Sub-model 2: from brand delity and brand reliability to communality and exchange Both hypotheses that predict respective exogeneity of reliability and delity on exchange and communality were supported[2]. The predictions that reliability is the fundamental determinant of exchange relationship disposition (l 0:91, p , 0.001, SMC 0:82) and delity is the chief predictor of communality (l 0:56, p , 0.001, SMC 0:32) are supported. The relatively low explained communality variance is a concern and indicates some conceptual under-identication of the overall model. 21

Explained variance and t are different issues (Savalei and Bentler, 2006), but we infer high R2 as well as t. The relatively low explained variance (SMC 0:32) in the communality construct suggests further investigation. For instance, we believe that there are psycho-demographic attributes that dispose a consumer toward communal brand relationships, and we further suspect these may interact with brand characteristics (Fournier, 1998). These attributes are outside the scope of this research, but represent an important recommendation for follow-up research. 4.3.3 Sub-model 3: relationship outcomes H7 and H8 reect the idea that both communal and exchange characteristics contribute to subsequent relationship investment. We model investment as a formative construct rather than reective of communality and exchange (Chin et al., 2008). Despite the suggestion that items are often misspecied as reective (Jarvis et al., 2003), this is a case in which we have likely sacriced statistical t in favor of theory. Notably, we theorize investment as the attitudinal imperative of relationship characteristics. This decision is further supported by the relative independence of the two-item communality and exchange scales (Chin et al., 2008). Both structural paths from relationship nature (communality and exchange) to relationship strength (investment) are signicant

A three-stage model of consumer relationship investment Jeff Hess, John Story, and Jeffrey Danes

Journal of Product & Brand Management Volume 20 Number 1 2011 14 26

and neither suggests that statistical signicance is merely an artifact of a relatively large sample size. The communality . investment (l 0:56, p , 0.001) and exchange . investment (l 0:52, p , 0.001) path estimates indicate both clearly contribute to the relatively high percentage of investment explained by the submodel (SMC 0:82). H9/H10 make the general argument that both investment and exchange support transactional loyalty, which relies on functional performance and value expectations, but protability indicators such as price insensitivity are residual effects of investment only. Investment (l 0:44, p , 0.001) and exchange (l 0:50, p , .001) both predict transactional loyalty as hypothesized. H9-H12 are also supported as the investment . willingness to pay more (l 0:70, p , 0.001) and exchange . willingness to go out of way to visit (l 0:76, p , 0.001) paths are signicant and quite large.

5. Summary
5.1 Implications A steady stream of empirical support continues to build momentum for a paradigmatic transition from performancebased exchange relationships toward invested consumer relationships. Not only are communally oriented invested relationships less expensive to maintain, but they may also result in protable consumer behaviors beyond the purview of traditional loyalty assessment. The research presented here supports the thesis that specic performance evaluations about brand products and service determine the ultimate strength and nature of the relationship, as mediated by brand reliability and brand delity. For instance, service satisfaction contributes to evaluations of brand delity (H1), which in turn inuences communality (H4) and subsequent consumer brand investment (H7). Similarly, product performance builds perceptions of brand reliability (H2) and subsequent exchange characteristics (H5) that are also necessary for the development of brand investment (see Table IV for a summary of hypotheses). In other words, service performance is a key contributor to personal aspects of brand relationship investment, expressed in this research as Table IV Hypothesis test summary
Hypothesis conrmed? Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Hypotheses: number and description

communality, while product performance is the primary indicator of reliability and the functional or exchange aspects of the relationship. Both functional and personal relationship characteristics are required for full relationship investment to develop. A fundamental contribution of this work is the suggestion that relationship research relying on a unidimensional, primarily functionally oriented, view of consumer-brand relationships will ignore the critical role of relationship communality in developing invested consumer relationships. Such a model may successfully connect performance to exchange-based commitment and subsequent transactional loyalty, but miss the personal requirements of fully invested relationships and a range of additional protable consumer behaviors. Specically, the nature of a brands initial relationship investment will determine the strength and nature of consumer relationships. Product-oriented performance, and those aspects of the consumer experience that imply brand competence, work toward evaluations of brand reliability and an exchange relationships connection. Service-oriented performance, and the aspects of the experience that communicate brand care or concern for the consumers interest, typically engender perceptions of brand delity, the required condition for relationship communality and terminal investment. The implications for marketers are that when customer satisfaction is positioned as the primary arbiter of return on investment in customer experience, functionality, and implied competence are the dominant characteristics of preferred focal investments. Service and duciary policies under this structure may be relegated to supporting roles, viewed primarily as necessary costs to be targeted for efciencies. We suspect that the persistent deterioration of customer service, and the strategic move away from face-to-face consumer interaction (Schulz and Bailey, 2000), is sourced in the fundamental objective to minimize service cost while maintaining minimum service standards suggested by satisfaction based attitude models. If, on the other hand, protable relationships and their longer-term nancial rewards are the primary objective, service-oriented customer interface reects a precious opportunity to transform consumers from variety-seeking competitors to invested relationship partners. 5.2 Limitations and future research Two limitations of this research, one empirically discovered here, suggest additional research. First, we have previously operated under the assumption that consumer psychodemographic proles and brand personality components were general model modiers that moderated overall strength of all personal connection paths. The relative inability to explain communality offers the possibility that a consumers personal disposition toward relational connections, as moderated by brand personality, may operate directly on relationship communality. In certain product categories that seem to promote relationships, like automobiles, retail clothing, and other high involvement categories, certain customers are more predisposed toward relationship connections than others. For some customers brands are integral to their afliations (Fournier, 1998), while other customers prefer variety and actively seek out transactions with brands other than those with which they are familiar. In addition, customers may be acionados of a particular 22

H1

Service satisfaction positively inuences brand delity H2 Product satisfaction positively inuences brand reliability H3 Brand reliability positively inuences brand delity H4 Brand delity positively inuences communality H5 Brand reliability positively inuences exchange H6 Exchange positively inuences communality H7 Communality positively inuences investment H8 Exchange positively inuences investment H9 Investment positively inuences willingness to pay more for the brand H10 Investment positively inuences willingness to go out of way to visit H11 Investment positively inuences transactional loyalty H12 Exchange positively inuences transactional loyalty

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Journal of Product & Brand Management Volume 20 Number 1 2011 14 26

category because of a vocational or avocational interest, contributing to natural involvement and the likelihood of bonding to brands in that category. For instance, a chef may be devoted to specic cookware brands, but be disconnected from brands in all other categories. Subsequent evaluations of the investment model should include a consumer psychodemographic typology and brand image and personality attributes that either act as exogenous communality predictors or moderate post-experience path effects. It should also be noted that the hypothesized non-signicant paths will be modied out of the model in future structural tests (Joreskog and Sorbom, 1989). The second limitation concerns the category-specic nature of consumer-brand relationships and its interaction with consumer and brand characteristics. Even if product performance is impeccable and customers trust a brand implicitly, relationships do not always form, and this pattern can be differentiated by product category. Relationship formation is moderated by customer characteristics, as suggested above, but also by product category and purchase context. Certain product categories, by their nature, lend themselves to relationship formation. This is particularly true in categories where product failure is costly and transactions imply lengthy interaction or ownership period, or those in which brand use is relatively exclusive (e.g. Sheth and Parvatiyar, 1995). This investment model was tested in a category where product and service are both important to the interaction and both are clearly under the purview of the brand. Future research will test this model in contexts where a customer facing service provider and brand can be separated (e.g. automotive) and those in which service is only implied through brand policies such as consumer packaged goods. We also believe the basic premise of the investment model personal and functional experience evaluations inform communal or exchange relationship dispositions that ultimately determine the nature and strength of relationship investment should apply to certain business-to-business associations as well as consumer relationships described here.

relationship baseline requirement operates at a more nascent stage of relationship development, and is fairly stable once relationship conditions reected in brand delity and brand reliability are established.

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Notes
1 The overall measurement model t the data reasonably well (Chin et al., 2008) considering the relatively large number of parameters to estimate (x2 904:052, 131 df CFI 97, NNFI 0:95, PNFI 0:74, RMSEA 90percentCI 0:068 (0.064-0.072). PNFI (James et al., 1982) and RMSEA conrm a suitable t to complexity relationship. Overall Investment Model Fit Statistics: Indices indicate an acceptable, practically, if not statistically, tted model; x2 1; 853 with 226 df, p , 0.001; CFI 0:94, NFI 0:93, PNFI 0:83 and RMSEA 90percentCI 0:075 (0.072-0.078). In fact, the PNFI (James et al., 1982) of 0.83 suggests that the overall model ts quite well, given its complexity. 2 Two of three hypothesized path relationships are supported ( p , 0.001). H6 states that there will be a signicant, path from exchange to communality. This path was not conrmed (l 0:001, p 0:983) indicating clear discrimination between the concepts, and suggesting the conditional relationship between functional and personal connection development may be resolved at the trust component (delity and reliability) level. Specically, it appears as though competence-oriented performance as a

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John Story is an Associate Professor of Marketing at The University of St Thomas in Houston, Texas. He has published in the Journal of Business Research, the Journal of Consumer Marketing, the Journal of Product and Brand Management, and in a variety of industry publications. John Storys research interests focus on understanding customer-brand relationships and cross-cultural marketing. Jeffrey Danes is a Professor of Marketing in the Orfalea College of Business, Cal Poly. He is a co-author of Mathematical Models of Attitude Change, Academic Press. His work in MDS is published in Multivariate Techniques in Communication Research, Academic Press. His work in Bayesian conjoint is published in the Journal of Marketing Research. Jeffrey Danes is also published the World Wide Web Journal, Journal of Business Research, Journal of Sales and Personal Selling, Human Communication Research, Communication Yearbook, and the Journal of Consumer Research.

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benets of the material present. Most organizations used to view their associations with customers as being largely transactional in nature. This has changed somewhat because it is now widely acknowledged that creating meaningful relationships between customer and rm is essential for long-term business success. The effort can be worthwhile as customers often become more committed and more loyal as a result. Such customers are also likely to be more protable and might even act as brand ambassadors. Many scholars assume that relationship marketing is founded on the presence of the trust and commitment dimensions that are at essential to the success of personal relationships. Different models have been proposed to explain the brand-consumer relationship and the potential conict between personal and functional relationship goals has impaired understanding of how it develops. The notion that fruitful consumer-brand relations incorporate both functional and personal elements now dominates academic thinking. It is mooted that both economic and emotional goals are crucial to the formation of invested consumer-brand relationships. The presence of relational benets in addition to those provided by functional utility can persuade the consumer to personally connect with the brand. From the company perspective, invested relationships will mean that unwelcome consumer response to factors like competitor advances or occasional brand failure becomes signicantly less probable. Relationship investment is presented as a multi-stage developmental process that commences with positive evaluations of brand performance. Belief in the delity and reliability of the brand is generated as a result. Perceived delity and reliability then respectively inspire communal and functional brand connections and relationship investment subsequently follows. Hess et al. point out that the anticipation of economic or relational benets evolves at 25

Further reading
Aaker, D. (1991), Managing Brand Equity, The Free Press, New York, NY. Berscheid, E. and Peplau, A. (1983), The emerging science of relationships, in Kelley, H. (Ed.), Close Relationships, The Free Press, New York, NY, pp. 1-65. Dwyer, F.R., Schurr, P.H. and Oh, S. (1987), Developing buyer-seller relationships, Journal of Marketing, Vol. 51, April, pp. 11-27. Goodwin, C. (1996), Communality as a dimension of service relationships, Journal of Consumer Psychology, Vol. 5 No. 4, pp. 387-415.

About the authors

Jeff Hess is an Associate Professor of Marketing at Cal Poly State in San Luis Obispo, California. He has published articles in various industry and academic publications as well as award-winning papers in various national conference proceedings. Jeff Hess primary research interest is the formation, management, and implementation of customerrm relationships. His foundational work on consumer trust is widely cited in the academic marketing literature. Jeff Hess is the corresponding author and can be contacted at: jhess@calpoly.edu

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each stage and determine whether relational bonds between consumer and brand strengthen or stagnate. For any relationship to last, trust is paramount. In a business context, organizations need to be trusted in order to maximize the benet of relationship investment. Trust emerges from the brands delity and reliability and various authors regard its presence as vital if a transactional relationship is to evolve into one which is more enduring. Consumers who are consistently satised with their encounters with a brand will consider it reliable. Brand reliability then serves to guide expectations of future performance in terms of product and service quality. In terms of the investment relationship process, the authors describe reliability as an initial screen that enables potential partners to be evaluated. While reliability concerns such as consistency in performance and product quality, brand delity reects whether or not it is actually motivated to deliver customer satisfaction. Various activities and gestures involving direct human contact can indicate delity including swift resolution of problems, employee friendliness and efciency and concern for consumer welfare. Extant literature differentiates between exchange and communal relations. Analysis of explicit or implicit cost and benets is at the heart of the former, which is akin to a relationship with a business partner. In contrast, a communal connection more accurately mirrors a relationship that is more intimate. As with close friends or family members, the brand partner in such a relationship is considered unique and irreplaceable. It is rarer to nd consumer-brand relationships based on communal connections but such relationships are more durable. Researchers accept that these relationships demand more initial brand investment than those founded on transactional exchange but promise benets in the shape of psychological and emotional rewards. These are in addition to consumer behavioral outcomes that relate more directly to revenue and prot. Since relations gradually progress from being transactional to being more communal in nature, brands must ensure that consumers are satised with the initial or infrequent purchases they make in order to establish the necessary functionally-oriented association. Some relationships may not progress to the communal stage but could still offer transactional loyalty should functional satisfaction prevail over the longer term. However, certain scholars have commented on the uncertainty surrounding this loyalty form. The proposed model was examined in an online study of US customers of fast food restaurants. This product category was selected because brand evaluation is based on both product and service performance and because it was possible to compare enough recognizable brand names. Consumers varied in terms of demographic characteristics and the nal

sample of 1,350 was considered representative of a fast food consumer population. Respondents were randomly allocated to two restaurants and asked to answer various questions relating to restaurant performance and their attitude and behavior towards the brand. Signicant research ndings included evidence that: . brand delity is positively inuenced by service satisfaction; . product satisfaction positively impacts on brand reliability; . communality is positively inuenced by brand delity; . brand reliability positively encourages exchange; and . communality and exchange both positively impact on relationship investment. In addition, the notion that development of the relationship construct occurs in a chronological manner was likewise conrmed. The study also revealed that relationship investment made consumers more willing to pay higher prices for the brand and to make special journeys to certain restaurants rather than visit a competitor brand instead. Based on these results, Hess et al. conclude that full relationship investment will only emerge when both functional and personal relationship characteristics are present. The authors propose that marketers should adopt a serviceoriented customer focus in order to secure their loyalty. Such an approach can lead to competitive advantage over rms that place a low priority on service and personal interaction with their customers. By limiting the idea of customer satisfaction to the attainment of functional objectives, these organizations face a greater risk that customers will be tempted to seek variety and experience other brands. Since it is a possibility that some consumers may be more inclined towards relational connections, future research could examine the impact of consumer characteristics on relationship communality. Personal involvement could be signicant in this respect. It is suggested that personal attributes might combine with brand identity to either predict communality or moderate its subsequent impact. The likelihood that product category can inuence consumer-brand relationships is another avenue to explore. According to some analysts, certain product categories may be more likely than others to inspire relationships to form. Categories in which interaction or product ownership is lengthy or where product failure has signicant implications are cited as possibilities. They also believe that relationships can develop if brands are perceived as exclusive. (A precis of the article A three-stage model of consumer relationship investment. Supplied by Marketing Consultants for Emerald.)

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