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International Journal of Hospitality Management 29 (2010) 405412

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Contents lists available at ScienceDirect

International Journal of H

l se1. Introduction

Competition in the Australian coffee outlet industry hasintensied due to the invasion of international chain coffee outletsin recent years. A report by Parker (2005) predicted that the coffeedemand in Australia will increase from US$268.57 million in 2006to US$307.13 million in 2011, ranking it among the worlds top 18countries. Attempting to occupy stronger positions in theAustralian coffee outlet market, the three US chains, Gloria Jeans,Starbucks and The Coffee Bean, entered a new phase of expansion(Lloyd, 2002). In 2002 this resulted in a coffee retailing war inwhich Gloria Jeans and McDonald Family Restaurants rstintroduced television advertising to promote coffee outlets. AsSchirato, Vittoria coffee chief warned that Australias local cafes areunder threat from large chains and they really need to start doingthings differently (Smedley, 2004, p. 37).

According to Ball (2005), these outlets were operating in acrucially competitive environment, in which competition was notonly coming from an increasing number of independent coffeeoutlets, but also from increasingly expanding chain coffee outlets.This expansion in the industry for both independent and chaincoffee outlets could not have existed without customer demand.Customer loyalty is a crucial component for survival, with loyalcustomers sustaining business operations. Thus, the necessity ofincreasing this market for the development of the coffee outlet

industry has created a need for information on the behavior ofcoffee outlet customers in regard to customer loyalty.

Mattila (2004) and Oh et al. (2004) suggested that researchtopics including service quality, relationship marketing, andperceived value are crucial areas for research within the domainof customer loyalty in hospitality. Previous studies on customerloyalty have focused on service quality and customer satisfaction(Zeithaml et al., 1996), and on relational benets as a relationshipmarketing approach to customer loyalty (Gwinner et al., 1998;Hennig-Thurau et al., 2002). However, these studies haveneglected to provide insights into the reasons perceived value isso important in relationship marketing research.

Customers are rarely motivated in the rst instance by theattributes of a service or product, but rather by the benets thoseattributes bring with them (Liang, 2004). It is important to realizethat different customers may attach different values to thesebenets. Customer behavior is an eclectic eld involving dynamicinteractions and exchanges (Mattila, 2004, p. 449) and is betterunderstoodwhen analyzed via perceived value (Heskett et al., 1997;Woodruff and Gardial, 1996). According to this view, relationalbenets may strongly enhance value aspects of the evaluationprocess, where each party exchanges something of value toinuence loyalty. Therefore, this study aims to ll the gap byinvestigating the effect of relational benets on perceived value towin customer loyalty. It is hoped that this study will provide thecoffee outlet operators a better understanding of customersbehavior, andassist theminmappingout their distinctivemarketingstrategies in order to achieve and maintain a superior competitiveposition in the coffee outlet industry.

* Corresponding author.

E-mail address: ptchen@mail.mcu.edu.tw (P.-T. Chen).

0278-4319/$ see front matter 2009 Elsevier Ltd. All rights reserved.doi:10.1016/j.ijhm.2009.09.006The effect of relational benets on perceAn empirical study in the Australian co

Po-Tsang Chen *, Hsin-Hui Hu

Ming Chuan University, Hospitality Management, 5 De-Ming Rd., Gui-Shan, Taoyuan 3

A R T I C L E I N F O

Keywords:

Relational benets

Perceived value

Customer loyalty

Coffee outlets

A B S T R A C T

Retaining and cultivatin

marketers and operators d

a model investigating how

self-administered questio

The ndings show that rel

addition, relational bene

value positively inuence

better understanding of

strategies that differentia

market.

journal homepage: www.ed value in relation to customer loyalty:e outlets industry

Taiwan

stomer loyalty has become increasingly important for coffee outlet

o the highly competitive environment. This study aims to develop and test

ational benets enhance perceived value to win customer loyalty. Using a

ire survey, 949 respondents from coffee outlets were used for this study.

nal benets have direct effect on perceived value and customer loyalty. In

lso have indirect effect on loyalty via perceived value. Finally, perceived

stomer loyalty. The ndings suggest that coffee outlet operators with a

ir customers perceptions, and help them in developing competitive

hemselves from competitors and win customer loyalty in an aggressive

2009 Elsevier Ltd. All rights reserved.

ospitality Management

vier .com/ locate / i jhosman

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 4054124062. Literature review

2.1. Relational benets

Relationship marketing, which focuses on approaches tobuilding, developing and maintaining a successful relationalexchange (Gronroos, 1994; Morgan and Hunt, 1994), is changingmarketing orientation from attracting short-term, discrete trans-actions to retaining long-lasting, intimate customer relationships.Czepiel (1990) has pointed that customer relationship exchangesare particularly important because customers expect to receiveadditional benets as a result of engaging in interpersonal focus.These benets that are interpersonal in nature have been termedrelational benets in the literature, and accrue to thosecustomers who are engaged in continuing relationships with theservice provider and its personnel (Gwinner et al., 1998; Hennig-Thurau et al., 2002).

Gwinner et al. (1998) conducted in-depth interviews andquantitative studies to examine the benets customers receivefrom relational exchanges. Their ndings from the qualitativestudy rst revealed four relational benets in terms of thepsychological (Bitner, 1995;Morgan andHunt, 1994), social (Berry,1995; Price and Arnould, 1999), economic (Peterson, 1995) andcustomization benets (Barlow, 1992; Crosby, 1991). Subse-quently they empirically identied a typology of three relationalbenets: condence benets (psychological), social benets, andspecial treatment benets (economic and customization). Con-dence benets in association with psychological benets refer toperceptions of reduced anxiety and comfort in knowing what toexpect in the service encounter. Social benets, which pertain tothe emotional part of the relationships and focus on personalrecognition of customers by employees and the development offriendships between customers and employees, are obtained bycustomers who have long-term relationships with service rms.Special treatment benets, which take the form of relationalcustomers receiving price breaks, faster service, or individualizedadditional services, are recognized as the idea of relationshipmarketing for customer focus and customer selectivity.

The above literature suggests that relational benets exist andare derived from relationship exchange. Exchange has beenaccepted as a core concept of the marketing discipline (Bagozzi,1975).Marketing exchanges take place because all parties involvedexpect to gain value in the exchange. Value has been thefundamental basis for all marketing activity (Holbrook, 1994, p.22). Although researches on relational benet focused only on thebenets of service relationships (Gwinner et al., 1998; Hennig-Thurau et al., 2002), but they ignored the effect of relationalbenets on customer perceived value to inuence customerloyalty. Based on exchange theory, this study thus argues thatcustomers may gain better value, enhanced by relational benetsthrough relational exchanges. Thus, the following section willreview the literature of perceived value.

2.2. Perceived value

Although numerous denitions of perceived value exist, thedenition of Zeithaml (1988, p. 14) is the most universallyaccepted trade-off denition of perceived value in the literature.The uni-dimensional conceptualization strategy is effective andstraightforward, but it cannot discern the complex nature ofperceived value. As noted by Sweeney and Soutar (2001), a moresophisticated measure is needed to understand how consumersvalue products and services (p. 207). In fact, it is important tounderstand the value concept in an integrative approach, becauseone can understand a given type of value only by considering itsrelationship to other types of value (Holbrook, 1999).Past research conceptualizing perceived value as simply atrade-off between quality and price is not sufcient to gaincompetitive advantage (Rintamaki et al., 2006). Perceived valueis operationalized in some hospitality literature and marketingliterature with a single-item scale in measuring customerperceived value in terms of value for money or functional value.Al-Sabbahy et al. (2004) insisted that the single items cannotaddress the concept of perceived value. Thus, a number ofresearchers argued that perceived value is more complex, that amulti-dimensional approach of value perceptions should beconsidered by scholars and managers, and that customerchoice is the result of multiple value perceptions (e.g. Petrick,2002).

Although a number of value perceptions have been identied inthe literature (i.e., functional, emotional, and social), there appearto be two universal value perceptions more appropriate toconsumer behavior (Sheth, 1983). Sheth (1983) proposed twoshopping motives: functional motives related to tangible needssuch as convenience, quality, and price, and non-functionalmotives related to intangible wants concerning reputation, andsocial and emotional needs for interaction. Further to this, Bhat andReddy (1998) pointed out that functional value satises practicalneeds while symbolic value satises customers self-enhancementand sensory pleasure needs. Moreover, the view discussed above isalso bolstered by Rust et al. (2000) indicating that customer choiceis inuenced by the perception of functional value, which areformed primarily by perceptions of quality, price, and convenience.On the other hand, the hedonic school posits that the symbolicvalue has its origin in the emotional or experiential appraisal of thebrand (Rust et al., 2000; Vazquez et al., 2002).

Table 1 presents multiple dimensions of perceived valueidentied by previous studies and shows that customers perceivedvalue in terms of their functional aspects: efciency-convenienceand excellence-quality in the typology of Holbrook (1999);functional value in Sheth et al. (1991); utilitarian in Babin et al.(1994); cognitive in Gronroos (1997); acquisition in Grewal et al.(1998); price and quality in Sweeney and Soutar (2001); quality,monetary and behavioral price in Petrick (2002); service excel-lence-quality, and efciency and price in Mathwick et al. (2002);utilitarian-quality and price in Tsai (2005); functional value inSanchez et al. (2006); and utilitarianmonetary saving andconvenience in Rintamaki et al. (2006). They also perceived valuein terms of symbolic aspects: fun-play and aesthetics in Holbrook(1999); social and emotional value in Sheth et al. (1991); hedonicvalue in Babin et al. (1994); emotional in Gronroos (1997); socialand emotional in Sweeney and Soutar (2001); emotional andreputation in Petrick (2002); aesthetics and playfulness inMathwick et al. (2002); affective and symbolic in Tsai (2005);social and emotional in Sanchez et al. (2006); and social andhedonic in Rintamaki et al. (2006).

The growing body of conceptual knowledge about perceivedvalue is quite fragmented,with different points of viewadvocated,and no widely accepted way of pulling them all together andapplying them to service settings (Rintamaki et al., 2006). Thisstudy argues that based on the literature, customer perceivedvalue has both functional and symbolic dimensions. Functionalvalue is therefore dened in this study as an overall assessment ofvalue incorporating quality, the traditional value for money, andconvenience characteristics. This type of value represents thecustomers perception of quality in terms of goods and servicesreceived from the coffee outlet, the price paid for those goods andservice, and the time saving to receive them. Symbolic value isdened as an overall representation of experiential valueperceptions from the social, emotional, the aesthetic, andreputation aspects. This value represents the customers impres-sion on others, perception of delight or pleasure, enjoyment of the

rceiv

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P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412 407Table 1Multi-dimensional approach to perceived value.

Authors (s) Conceptualization/dimensions of pe

Sheth et al. (1991) Functional value Social value Emotional value Epistemic value Conditional value

Babin et al. (1994) Utilitarian value Hedonic value

Gronroos (1997) Cognitive Emotional

Grewal et al. (1998) Acquisition Transaction

Holbrook (1994, 1999) Efciency Excellence Status Esteem Play Aesthetics Ethics Spirituality

Sweeney and Soutar (2001) Functional dimension (price and q Social dimension Emotional dimension

Petrick (2002) Quality Monetary price Behavioral price Emotionalvisual appeal, and reputation of outlet, involved with theconsumption experience.

2.3. Loyalty

Customer loyalty, a key variable, is concerned with thelikelihood of a customer returning, making business referrals,providing strong word-of-mouth, as well as providing referencesand publicity (Bowen and Shoemaker, 1998; Tam, 2004). Theliterature review has pointed out that although loyalty has beendened in various ways, there are two main approaches:behavioral and attitudinal (Chaudhuri and Holbrook, 2001; Dickand Basu, 1994; Zeithaml, 2000). The rst approach considersloyalty as behavioral (Ehrenberg et al., 1990; Kahn et al., 1986),assuming that repeated purchasing can capture the loyalty of acustomer towards the brand of interest. Behavioral loyalty isexpressed as repeated transactions. This approach, however,cannot distinguish between true loyalty and spurious loyalty.Researchers who have studied the two-dimensional approachsuggest that focusing on behavior alone (i.e., repeat purchases)cannot capture the reasons behind the purchases. That is, bystudying behavior alone, one does not know whether the repeatpurchases stem merely from, say, convenience, monetary incen-tives, or whether the customer really maintains attitudinal loyalty(Dick and Basu, 1994; Pritchard and Howard, 1997).

ReputationMathwick et al. (2002) Aesthetics (visual appeal and entertain

Playfulness (escapism and enjoyment) Service excellence Customer ROI (efciency and price)

Tsai (2005) Utilitarian (quality and monetary price

Affective (emotional and behavioral pr Symbolic (reputation)

Sanchez et al. (2006) Functional value (installations, professquality, and price)

Emotional Social

Rintamaki et al. (2006) Utilitarian (monetary saving and conv Social (status and self-esteem) Hedonic (entertainment and exploratioed value Research context

In consumer goods (e.g. cigarettes)

In a shopping setting

Theoretical

Assesses perceived value of bicycle

Theoretical

ty) Assesses perceived value of consumer durable goods

Assesses perceived value of serviceThe attitudinal approach suggests that attitude should beincluded along with behavior to dene loyalty. However, Dick andBasu (1994) argued attitudinal scales serve as a more valuablemeans to recognize the determinants of customer loyalty thanbehavior scales and therefore, have a primary advantage of overbehavior scales. Assael (1992) dened loyalty as a favorableattitude towards a brand, thus resulting in consistent purchases ofthe brand over time, supported by Keller (1993).

Several researchers have used attitudinal measures of customerloyalty (Butcher et al., 2001; Lee et al., 2005). Lee and Cunningham(2001) have argued that attitudinal measures have an advantageover behavioral measures (e.g. repeat patronage) in that they canprovide greater understanding of the factors associated with thedevelopment of loyalty (Oliva et al., 1992; Riley et al., 2001).Rundle-Thiele and Bennett (2001) also argued that attitudinalloyalty measures would be useful in service markets, sinceattitudinal measures can identify a customers favorable attitudetowards a company in the service context. Dick and Basu (1994)proposed that customer preference is central to a loyaltyconceptualization. Their view is supported by Butcher et al.(2001) indicating that loyalty conceptualization is customerpreference for the service ahead of competition. Therefore, thepresent study dened loyalty as a customers favorable attitude ofenduring psychological attachment, resulting in preference,towards the provider based on experience.

ment) Assess consumer experiential value in the catalogue

and internet shopping setting

) Assesses consumers perceived value on products

(e.g. computers, coffee, denim wear)

ice)

ionalism, Assesses a tourism product

enience) Assesses the value of department store shopping

n)

et al., 1997; Jayanti and Ghosh, 1996; Woodruff, 1997). Perceivedvalue has been found to inuence purchase intensions (Brady andRobertson, 1999; Cronin et al., 1997; Sweeney et al., 1997). Oh(2000a), in particular, indicates that the concept of customer valueis crucial for the restaurant industry. Results of Ohs (2000b) studyillustrate the importance of customer value as a powerful predictorof customer loyalty in dining decision processes. Kwun and Oh(2004) found that perceived value had a positive impact oncustomer loyalty in the restaurant industry. Tam (2004) also foundthat perceived value was shown to have a positive effect oncustomer loyalty in the restaurant industry. Perceived value is animportant concept, as it is believed to have an inuence oncustomer loyalty. Based on the above discussion, the followinghypothesis related to perceived value and customer loyalty can beproposed.

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 4054124083. Conceptual framework and hypotheses

3.1. Relational benets and perceived value

Perceived value is the consumers overall assessment of theutility of a product based on perceptions of what is received andwhat is given (Zeithaml, 1988, p. 14). Customers are more likely tostay in a relationship when the gets (specic benets) exceed thegives (monetary and non-monetary costs). In addition, Ravald andGronroos (1996) have suggested that value assessments shouldtake into account relationship benets for relationship exchange.When rms can consistently deliver value from the customerspoint of view, clearly the customer benets and has an incentive tostay in the relationship. Beyond the specic inherent benets ofreceiving service value, customers also benets in other ways fromlong-term associations with rms. Lovelock (2001) suggested thatperceived value could be enhanced by either adding benets to theservice or by reducing outlays associated with the purchase anduse of the service. Liljander (2000, p. 165) noted that perceivedrelationship benets add to the perceived value of the productbecause the relationship is strengthened when customers per-ceived benets beyond their satisfaction with the core product(Gwinner et al., 1998). On the other hand, the value concept isclosely linked to the exchange theory of marketing (Bagozzi, 1975;Juttner and Wehrli, 1994). Marketing exchanges take placebecause all parties involved expect to gain value in the exchange.Exchange processes with mixed meaning integrate utilitarian andsymbolic values (Juttner and Wehrli, 1994). The more benets thecustomer received, the greater value customers received. There-fore, this study proposes the following hypothesis.

Hypothesis 1. Relational benets will have positive effects onperceived value.

3.2. Relational benets and customer loyalty

Researchers contend there is a strong relationship betweenrelational benets of the customer-provider and customer loyalty(Gwinner et al., 1998; Hennig-Thurau et al., 2002; Reynolds andBeatty, 1999). For example, Gwinner et al. (1998) found thatdimensions of relational benets such as condence benet, socialbenets, and special treatmentbenethave signicant relationshipson outcomes such as loyalty and positive word-of-mouth. In linewith these ndings, Hennig-Thurau et al. (2002) also conrmed thatrelational benets positively inuence customer loyalty.

According to Mintzberg (1994), the appropriateness of rela-tional strategy (e.g. relational benets) is related to customerperceived value. Additionally, perceived value is regarded as thefundamental basis for allmarketing activities (Holbrook, 1994) andthe customers overall assessment of products and services(Zeithaml, 1988). Thus, this study argues that marketing strategyof relational benets is assessed and judged by perceived value. Itcan be therefore expected that relational benets inuencingcustomer loyalty via perceived value is pivotal to establishcustomer relationships exchange, based on the exchange theoryperspective. Thus, this leads to the following hypothesis.

Hypothesis 2. Relational benets positively inuence customerloyalty.

Hypothesis 2a. Relational benets have indirect effect on custo-mer loyalty via perceived value.

3.3. Perceived value and customer loyalty

Perceived value is an important concept, as it is believed to havean inuence on customer loyalty (Chang and Wildt, 1994; CroninHypothesis 3. Perceived value positively inuences customer loy-alty.

Based on above literature review, this study proposed a modelintegrates relational benets, perceived value, and customerloyalty. The proposed model is presented in Fig. 1 showing theeffect of relational benet on perceived value which in turninuences customer loyalty.

4. Methodology

4.1. Survey instrument

A self-administrated questionnaire was design to test the effectof relational benets on perceived value to inuence customerloyalty. The questionnaireswere rst checked by a panel of expertsto assess whether there were misunderstandings or ambiguities ofexpressions to check for content validity. In an attempt to establishthe reliability of the measures effectively, a pilot study with coffeeoutlet customers was then conducted to deal with such matters asinstructional clarity, item clarity, and relevance.

The relational benets scale consists of 9 items representingcondence, social and special treatment benets adapted from(Gwinner et al., 1998). A total of 14 items was used to measure twodimensions of perceived value. The measures for functional andsymbolic dimensions of perceived value were mainly adapted fromPetrick (2002) and Sweeney and Soutar (2001) except for anaesthetics element of symbolic value adapted fromMathwick et al.(2002). The customer loyalty scale consists of ve items with twoitemsmeasuringword-of-mouth, adapted fromLeeetal. (2005), andthree items representing preference, adapted from Butcher et al.(2001), which are related to the hospitality industry and areappropriate to apply in the coffee outlet industry. All measuresemployed ve-point scales ranging from 1 (strongly disagree) to 5

Fig. 1. Conceptual framework of relational benets, perceived value, and customerloyalty.

structural model. The joint conrmatory factor analysis (CFA; withall constructs included simultaneously) reveals that the chi-squarefor the overall model is 227.42 (df = 11. p < 0.05). Other t indices,including the comparative t index (CFI = 0.95), root mean squareerror of approximation (RMSEA = 0.08), goodness-of-t index(CFI = 0.95), and non-normed t index (NNFI = 0.90), are satisfac-tory because they are equal to or better than recommended values.Thus, the proposedmodel provides a reasonable explanation of theobserved covariance among the constructs. In addition, weassessed the validity, reliability, and discriminant validity of themeasures. As we show in Table 3, the CFA results lend strongsupport to the convergent validity of all measures, because allestimated loadings of the indicators for the underlying constructs

Table 2Measurement scale and reliability.

Constructs and items Cronbachs a

Relational benets

Condence benet 0.76

Have condence

Know what to expect when I go in

Get high level of service

Social benet 0.90

Recognized by employee(s)

Being familiar with employee(s)

Have developed a good friendship with employee(s)

Special treatment benet 0.85

Offer discounts to regular customer

Offer better service to regular customer

Make great efforts for regular customers

Offer good value for money

Customer loyalty

Word-of-mouth 0.84

Say positive thing

Recommend to someone

Preference 0.87

Being my rst choice

Care about the success

Being a loyal customer

Table 3Conrmatory factor analysis results and relevant composite reliability.

Constructs and items Loading T-value Composite reliability

Relational benets 0.61

Social benet 0.57 17.85

Special treatment benet 0.52 16.14

Condence benet 0.60 18.54

Perceived value 0.63

Symbolic value 0.75 23.89

Functional value 0.61 19.78

Customer loyalty 0.72

Word-of-mouth 0.70 24.13

Preference 0.82 28.49

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412 409(strongly agree). Demographic information includes gender, age,occupation, and education.

4.2. Data collection

Having considered the data collection requirements of thisstudy such as a need of large sample of customers and quantities ofcoffee outlets, it would be appropriate to employ the eld surveywith a self-administered questionnaire as the primary datacollection technique for this study. The eld study method waschosen in order to gain information directly from individuals at thecoffee outlet settings. As such, their feelings and perceptions aboutthe setting with respect to relational benets, perceived value, andloyalty are likely to be clearly in mind (Danaher and Mattsson,1994). This study involved the administration of the questionnaireto a convenient selection of customers comprising the sample forthis study from chain and independent coffee outlets inMelbourne. Convenience samples are the most common form ofsampling design in social science research (Mohr, 1990) andpopular in service marketing (Bettencourt, 1997; Widing et al.,2003). The surveys were conducted onsite, the sampling targetbeing collected during all operating hours. Customers who agreedto participate would be provided with a survey to complete, whichwas collected before they left the coffee outlet. A total of 949 validresponses were used for data analysis.

4.3. Statistical analysis

The model and the hypotheses were simultaneously tested bystructural equation modeling (SEM). Internal consistency relia-bility, convergent validity, and discriminant validity were exam-ined before conducting conrmatory factor analysis for validatingproposed measurement indexes. The structural model was thenestimated with LISREL VIII.

5. Results

5.1. Prole of respondents

The demographic prole of the sample indicates that the genderof the respondents was evenly distributed, representing 52.6% offemale and 47.4% male, and the dominant age group of therespondents was 2544 years (47.5%), followed by 1624 years(36.0%), 4562 years (13.2%), and 63 years and older (3.3%)respectively. Students accounted for nearly 40% of the respon-dents. The other occupation groups of respondents on the whitecollar level were director/manager and professional/technicalpersonnel representing 27.7% of the respondents and the bluecollar level was represented by clerical/administration, service/sales accounts and manual/craft workers accounting for 18.6% ofthe respondents. Housewives, unemployed, and retired peoplerepresented only a small fraction of the respondents.

In terms of level of education, almost 63.4% of the respondentshad a university degree or above, followed by TAFE/college (19%),and secondary education (15.1%), whereas primary education(1.3%) made up the smallest group. The Cronbachs alpha of eachconstruct is between 0.76 and 0.90 which exceeded therecommended level of 0.7 (Hair et al., 1995). The results showedhigh reliability in Table 2. Since measurement scales showedacceptable reliability, multiple scale items then are summated tocreate a summated scale for each variable for further analysis.

5.2. The measurement model

The two-step procedure proposed by Anderson and Gerbing(1988) was employed to ensure an adequate measurement andPerceived value

Symbolic value 0.88

Improves the way I am perceived

Helps me make a good impression on people

Makes me feel delighted

Is appealing

Gives me pleasure

Is stylish

Is well thought of

Has a good reputation

Functional value 0.84

Is convenient for me

Is easy to locate

Provides good service at a reasonable price

Is consistent

Is outstanding

R1

0

0

ra

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412410Table 4Correlation coefcients, squared correlations, and AVE.

Variable Mean S.D.

Relational benets (RB) 3.29 0.91

Perceived value (PV) 3.62 0.74

Customer loyalty (CL) 3.51 0.93

a All correlation coefcients were signicant at the 0.05 level.b All AVE exceed 0.50, showing construct validity.

Table 5Structural model results.

Coefcient S.E. T-value

Relational benets!perceived value g11 0.86** 0.03 19.02Relational benets! customer loyalty g21 0.37** 0.03 2.82

Fig. 2. Results of structuare statistically signicant at the 0.05 level (Gefen et al., 2000).Toexamine the internal validity of the measurement model, wecalculated the composite reliability (CR) and average varianceextracted (AVE) (Fornell and Larcker, 1981). All the CRs, shown inTable 3, are above the recommended 0.6 level (Nunnally andBernstein, 1994). The AVEs of all constructs, which represent theamount of variance captured by the constructs measures relativeto measurement error and the correlations among the latentvariables, are higher than the 0.5 cutoff recommended by Fornelland Larcker (1981) for each construct. The internal validity of themeasurement model appears adequate. Furthermore, we con-ducted Fornell and Larckers (1981) test for discriminant validityby comparing the AVE estimate for each construct with thesquared correlation between any two constructs. The AVEs arehigher than the squared correlations, conrming the discriminantvalidity of the constructs (see Table 4). Therefore, the measure-ment model meets all psychometric property requirements.

5.3. Structural model results and test of hypotheses

Structural equation modeling using LISREL VIII (Joreskog andSorbom, 1993) was used to test the hypothesized model. Theresults presented in Table 5 show that Chi-square is signicant(x2(11) = 227.42, p < 0.05). As the Chi-square is not independent ofsample size (Bollen, 1989; Joreskog and Sorbom, 1993), we did notrely solely on the Chi-square to test the proposed model. The CFI(Comparative Fit Index), GFI (Goodness-of-Fit Index), and NNFI(Non-Normed Fit Index) have been recommended to counteractthe inuence of sample size. A rule of thumb is that these indexes

Perceived value! customer loyalty b21 0.53** 0.03 3.90Goodness-of-t statistics

CFI 0.95

GFI 0.95

NNFI 0.90

RMSEA 0.08

Chi-square 227.42

*p

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412 411expect and they will be recognized by employees who provide agreat service to them. The customers have condence that theywill have a quality consumption experience each time they visitthe coffee outlet and know that the employees will greet them byname and offer better service to them. It is believed that customersjudge their value perceptions through these relational benets interms of functional value and also symbolic value. Therefore, it isapparent that as customers continue to receive relational benets,particularly condence benets, every time they come in contactwith the coffee outlet providers, they become aware of functionaland symbolic value perceptions.

Furthermore, this study, as expected, supports that relationalbenets have direct effect on customer loyalty (Hennig-Thurauet al., 2002). It goes without saying that the more positiveperception customers showed on relational benets, the morepositive attitude customers showed on loyalty. In other words,such customer loyalty may require the perception of a high qualityservice with special emphasis on relational benets. The abovendings in understanding customers consumption experience ofcoffee outlets may serve as the foundation for coffee outletoperators to improve their marketing strategies to gain compe-titive advantages. On the other hand, this study also found thatrelational benets have indirect effect on customer loyalty throughperceived value. In view of the results obtained, we can say thatperceived value play an important role between relational benetsand customer loyalty. It seems therefore that perceived valuecaptures the fundamental effect, above relational benets, andprojects them onto loyalty, acting as a mediating variable.

This study empirically supports the nding that perceived valueplays an important role in inuencing customer loyalty (Croninet al., 2000; McDougall and Levesque, 2000). It is important tohighlight that the study has adopted the multi-dimensionalapproach beyond the value for money to perceived value. Thisstudy identied that not only perceived functional value but alsoperceived symbolic value are signicant predictors of customerloyalty. The ndings have enabled this study to expand existingknowledge of the value perceived by the customer visiting coffeeoutlets in particular, by comparing the different value perceptions.Compared to previous studies which view value for money asfunctional value to inuence customer loyalty (e.g. McDougall andLevesque, 2000; Tam, 2004), the ndings of this study reveal thatsymbolic value involving how a customer can improve the waythey are perceived and how they gain pleasure in a stylish coffeeoutlet with a good reputation is a determinant value perceptionbeyond the functional value in the prediction of customer loyalty.Previous studies focusing on functional value itself reach limitedinterpretation of how perceived value can affect customer loyalty.The results suggest that researchers should study customer loyaltynot only as functional value but also symbolic value. The ndingsalso suggest that customer loyalty can be generated throughimproving functional value as the bedrock and then building on topof this with symbolic value. The ndings imply that marketersshould not solely compete in price, location, and quality offunctional value, but should differentiate their products andservices from other competitors by providing symbolic valueperception derived from social, emotional, aesthetics, and reputa-tional aspects to attract and retain customers. Thus, it is believedthat the relationships between perceived value and customerloyalty will be more thoroughly comprehended with functionaland symbolic value perceptions, especially enhanced by relationalbenets in an increasingly competitive.

This study provides a comprehensive view for coffee outlets toreview their competitive advantages in relation to how thecustomers responded to their consumption experience, helpingmarketers and operators to provide benets and value in theirproducts and service offering, and further rene and adjust theirmarketing strategies to meet customers desires and needseffectively, ultimately to win customer loyalty. Finally, the modelbuilt for the present study is empirically tested from coffee outletindustry. This study could then be extended to other aspects of thehospitality industry where there exists competition across countryor cultural comparison.

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The effect of relational benefits on perceived value in relation to customer loyalty: An empirical study in the Australian coffee outlets industryIntroductionLiterature reviewRelational benefitsPerceived valueLoyalty

Conceptual framework and hypothesesRelational benefits and perceived valueRelational benefits and customer loyaltyPerceived value and customer loyalty

MethodologySurvey instrumentData collectionStatistical analysis

ResultsProfile of respondentsThe measurement modelStructural model results and test of hypotheses

Conclusion and implicationReferences